The higher cost of borrowing is unsettling for home buyers and sellers who were hoping for an environment with lower rates this autumn, NAR economist says.

As the mortgage rates continue to increase, a number of Americans feel trapped in their home, unable or unwilling to move due to today’s high cost of borrowing. The 30-year fixed rate mortgage climbed to 7.1% on a 7.31 percent average last week — the highest in a decade, Freddie Mac reports.

“However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory,” says Sam Khater, Freddie Mac’s chief economist. “These headwinds are causing both buyers and sellers to hold out for better circumstances.”

Indeed, economists are accusing the rising rates — which have been hovering higher than 7% over the past few weeks as a major reason for the decline in sales of homes. Contract signings dropped 7.1 percent from month to month for August. The real estate market is already slowing down as it enters more sluggish months of autumn in August. In August, the number of homes sold pending sales was almost 19% lower than the same time last year, according to the National Association of REALTORS(r), their most recent index of housing.

Jessica Lautz, NAR’s deputy chief economist, believes rising costs of borrowing are squeezing buyers of homes. In this week’s 7.31% median for home mortgages, the average monthly mortgage payment for a median-priced house at $413,500 would be $2270, Lautz claims. If a home is newly constructed with a cost of $430,300, which is the median for that category, the monthly mortgage amount will amount to $2,362, Lautz explains.

Freddie Mac reports the following averages for the nation, along with Mortgage rates during the week ended September. 28:

• Fixed-rate 30-year mortgages averaged 7.31 percent, which is up by a bit from the previous week’s 7.19 percent average. One year ago, the 30-year rate averaged 6.70 percent.
• 15-year fixed-rate mortgages averaged 6.72 percent, an increase from the previous week’s 6.54% average. In the year prior to this, the 15-year average was 5.96 percent.

“Overall, [mortgage] applications declined as both prospective home buyers and homeowners continue to feel the impact of these elevated rates,” says MBA Economist Joel Kan. Mortgage applications for buying homes last week were 27% less than the same week in the previous year, MBA reports.

“The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy,” Yun states. “There is no reason to increase interest rates. Furthermore the shutdown of the government will affect some homes sales in the short term because of the insufficient flood insurance or delays in mortgage insurance that is backed by the government.”