Mortgage rates blow past 6%. Here’s what it means to SLO County home buyers



For the first time in 14 years, mortgage rates climbed above 6%, surpassing the interest rate’s peak during the Great Recession. According to recent data from the Federal Home Load Mortgage Corp., known as Freddie Mac, 30-year fixed rate mortgages, the most common type of mortgage product, reached 6.7% on Thursday, Sept. 29, as the Federal Reserve raised interest rates to fight inflation. The most recent mortgage rate was more than double what it was one year ago, when rates sat at 3.01%, and marked the highest the 30-year fixed rate mortgage has hit this year, surpassing this year’s earlier peak of 5.81% in late June.

30-year mortgage rates cleared 6% Sept. 15, amid a six-week increase beginning Aug. 18 that saw rates climb around 1.5% from 5.13% to the current 6.7%. In San Luis Obispo County’s pricey housing market, the ripples of those high rates are already being felt by home buyers, local experts say.


Fernando Granados, a local loan originator with Envoy Mortgage in Arroyo Grande, said rates rising to the most recent peak represent the coming of another recession, despite some of the recent improvements seen in the economy. The Fed has been “in denial” about the impact of inflation, Granados said, and is now making up for some of the lost ground in the fight. “Inflation has snuck up on us now — I believe we’re on the verge of a recession, and the only way to fight inflation is to raise the rates,” Granados said. “The Fed is raising the rates now, and they’re going at such large increments because they fell behind.”

On top of that, the limited available stock of homes in the U.S. could keep prices and demand high despite the high mortgage rates. There are only around 700,000 to 800,000 available homes on the market nationwide, Granados said, and many of those homes are already under contract. However, no matter what the Fed does to adjust interest rates at this point, a recession will likely come, Granados said. That isn’t necessarily a bad thing for the housing market, he said, because while a recession will certainly hurt the wallets of millions of Americans, it will eventually begin to level out the housing market’s prices and mortgage spikes.

“If you look back in history, for the last 60, 70 years ... inflation hits, and when it’s followed by a recession, usually right after the recession, the rates start coming down,” Granados said. “We’re almost out of this. I’m thinking (in) the last quarter of this year or beginning quarter of 2023, the rates should start coming back down.” If recessions typically happen once every 10 years and the most recent major economic recession occurred in 2008, he said, then the economy is overdue for a downturn. That doesn’t mean rates will return to the sub-3% levels that were maintained during the COVID-19 pandemic’s housing surge, Granados said.

And it doesn’t mean mortgage rates and prices will instantaneously drop to the extent they did during the Great Recession, real estate broker Alex de Alba with The Real Estate Company of Cambria said. “In 2008, anyone would qualify for a loan, and people were unfortunately placed in a position to fail,” de Alba said. “After learning from our past mistakes, most banks have still been very strict on their loan requirements, making sure that the borrowers are well qualified.” Granados believes 30-year fixed-rate mortgage rates will settle around 4% give or take when the dust clears from any downturn or recession.

Richardson Properties Realtor Lindsey Harn agreed with the potential 4% resting place for rates once the bubble bursts. “There is no normal, yet according to the most recent Fannie Mae projection rates, next year we should be back in the mid 4% range,” Harn said. But before that happens, rates may reach their peak in early November, Granados said, though if they keep growing at the same rate as today, that could put them north of 7%, a mark not seen since February 2001.


Granados said high mortgage rates are already causing a slowdown for his SLO County business, where he said he has several customers who have been approved for mortgages for between four and six months. “(Those customers) make the same amount of money, the house is the same prices as they were six months ago or four months ago, but because of the interest rate, their payment is much higher now,” Granados said. However, there are reasons buyers can be optimistic about the future, both Granados and Harn said.

While Granados said home prices and rates are not intrinsically linked, Harn said rates this high will eventually cause prices to “flatten” as buyers are priced out by high interest. Additionally, those high rates may make applying for housing less competitive than it has been during the most recent housing boom, Harn said. “I would expect to see fewer multiple offers and a lower rate of appreciation during the periods where the interest rates are this high,” Harn said. In the immediate sense, Granados said while high prices and high mortgage rates may be discouraging, prospective home buyers should get into a home as soon as possible, admitting he might be “a little biased” because of his profession. At the very least, he said, buying a home will at least guarantee that payments will not rise year over year, a concern that is always present in an era of skyrocketing rents.

Harn gave similar advice, advising buyers to “marry the house, date the interest rate,” meaning looking to refinance the mortgage at a more favorable date or taking advantage of the complimentary refinances some local lenders may extend once rates cool down. “As a buyer, I would see this as a great opportunity,” Harn said. “The high rates may scare other buyers off, so a buyer could actually get a better price now, with less competition than waiting six months for rates to go back down.” If a recession is averted, buyers should closely watch the state of inflation, Harn said, as once inflationary pressures begin to ease, rates will start falling. The interest rate bubble will have to burst eventually, Granados said, and for better or worse, the next three to six months will determine whether rates will drop or become even more “ridiculous” than they are now. “It’s like a storm,” Granados said. “We’ve got to weather it, and we’ve got to just get to the other side.”