Mortgage Rates Hit 7.40%: Hearth-Loans Priced for Dragons

The average 30-year mortgage rate in Waterdeep rose to 7.40 percent this week, according to the weekly survey from Fraddie Mace Home-Loan Hall. That is up from 7.28 last week and 6.30 a year ago, and it is the highest reading in nearly three years. (I have checked this four times. The number is not shy.)

The 15-year hearth-loan climbed too, from 6.60 to 6.73 percent, against 5.53 a year back. The 30-year rate has risen 0.69 points in a single month. Mortgage rates do not follow the Federal Reserve of Waterdeep directly. They follow the Royal Exchequer of Waterdeep's ten-year note, which has been sitting above 5 percent while lenders fret about prices. I mentioned this when the Merchant Princes celebrated a record week while the realm's mood sank. The note kept climbing and the rate followed.

Now the arithmetic. Take a modest 300,000 gp home loan. A year ago, at 6.30 percent, the monthly payment on principal and interest was about 1,857 gp. Today it is about 2,077 gp. The difference is 220 gp a month, which is 3,670 loaves on the Loaf Index of 6 copper. Over a year that is roughly 44,000 loaves. Over the full thirty years it is about 79,000 gp extra, or 1.32 million loaves. (I did this on a flour sack and then on a second flour sack, because I did not trust the first.)

The chief economist at the Hall said the housing market "continues to be supported by favorable economic conditions" even as rates stay elevated. He also suggested that buyers collect several quotes, which can save thousands over the life of a loan. Both statements may be true. A gnome who shops five lenders will still be shopping in the same weather. Meanwhile, a hiring report so weak the guilds called it a wait-and-see moment means fewer buyers have the steady wages that lenders like to see.

The Reserve meets again on 28 October, and the gamblers on the trading floor are already weighing another hike. A hike there would not set mortgage rates by decree, but it would feed the same nervous mood. My colleague Sterling Vanmoor calls this "a healthy affordability reset." Sterling owns his keep outright and has never once asked a lender for anything.

My aunt Marigold, who keeps her savings in a boot, has no mortgage and is therefore having the best week of her life. She called to tell me so. I did not have the heart to say that boots do not earn interest, because for the first time in years, she looks like the sensible one.

What this means for your pantry: if you are buying a hearth, bring a bigger sack of flour to the closing. If you are renting, expect the landlord to read the same survey and call it a reason.

— B.T. (Loaf Index: see sidebar)