Homebuyers Lose $33,000 in Purchasing Power in 6 Weeks As Mortgage Rates Hit 7%

Daily average mortgage rates have increased by nearly a whole percentage point since mid-September, bruising homebuyers’ budgets. The jump in rates comes just one week before a presidential election in which housing affordability is a top issue for voters.

Mortgage rates hit 7% on October 28, the highest level since the start of summer and up nearly one percentage point from the 18-month low they dropped to in mid-September. 

A homebuyer on a $3,000 monthly budget can afford a $442,500 home with a 7% mortgage rate, the daily average 30-year fixed rate on October 28. That buyer has lost $33,250 in purchasing power over the last six weeks; they could have purchased a $475,750 home with the 6.11% average rate on September 17. That was the lowest level since February 2023. 

That buyer still has $17,000 more purchasing power than they would have had in April, when mortgage rates peaked at 7.5%. But the recent rise in mortgage rates is disappointing for buyers who missed out on the short window of rates that were much closer to 6% than 7%. 

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To look at affordability another way, the monthly mortgage payment on the $428,000 median-priced U.S. home  is $2,895 with a 7% mortgage rate. That’s about $200 higher than the $2,694 monthly payment with a 6.11% rate. 

Mortgage rates are jumping largely because investors are becoming more worried about increased government spending after the election. Additionally, the most recent jobs and inflation reports both reflected a fairly strong economy, making it more likely the Fed makes a small interest-rate cut–as opposed to a big one–at their next meeting. 

“My advice for buyers is to focus on finding a house they love and try to negotiate on things they have some control over, like the sale price and home repairs,” said Redfin Economic Research Lead Chen Zhao. “Sellers should know Redfin agents are reporting that there are buyers out there, but they’re mostly looking for move-in ready homes in good condition.” 

How rising mortgage rates impact housing affordability in swing states

Mortgage rates jumping to 7% could impact voters’ decision in the upcoming presidential election. Housing affordability is a top voting issue this year, according to a recent Redfin survey. 

Zooming in on the seven swing states that will decide the election, five of them have median home-sale prices lower than the national median of $428,000. Only Nevada ($468,000)  and Arizona ($442,000) have higher prices, though they’re only slightly higher. Assuming a typical house hunter in Nevada and Arizona have a $3,000 monthly budget, they have lost about $33,000 over the last six weeks–the same as for the typical buyer nationwide. 

In both Georgia and North Carolina, where the typical home goes for $377,000, let’s say the average buyer has a monthly budget of $2,500, a bit lower than in states where homes are more expensive. That buyer can purchase a $368,750 home with a 7% mortgage rate, compared to the $396,500 home they could have purchased with the 6.1% rates that were common in mid-September. That translates to a loss of $27,750 in purchasing power. 

Median home prices are comparatively low in Michigan ($266,000), Pennsylvania ($296,000) and Wisconsin ($316,000). Assuming the typical buyer in those states has an accordingly lower budget of $2,000, they can afford a $295,000 home with a 7% rate. They have lost $22,250 in purchasing power over the last six weeks; they could have bought a $317,250 home with a 6.1% rate. 

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