Mortgage rates hit 9-month high, raising costs for Long Island homebuyers

The average 30-year mortgage rate rose to its highest point in nine months this week, increasing the cost to purchase a home for already-stretched Long Island buyers.

New data released Thursday by mortgage giant Freddie Mac showed the average 30-year fixed mortgage rate climbed to 6.53%. The rate has increased more than half of a percentage point since the start of the Iran war in late February, as inflationary pressures have pushed interest rates higher.

"The consensus is no longer that rates are going to be below 6% in the near future," said Jeff Ostrowski, housing market analyst at personal finance website Bankrate.

Mortgage rates tend to move in tandem with the 10-year yield on U.S. Treasury bills, which often rises during periods of stronger inflation. The war sent oil prices soaring, which has driven up inflation, and mortgage rates have followed suit, Ostrowski said.

But the average long-term rate is still lower than it was at this point last year. At that time, the average 30-year fixed rate was 6.89%, and the average remains far below its 2023 peak of 7.79%.

So far, the rise in rates this spring hasn't shown signs of slowing Long Island's real estate market, and local mortgage experts said they don't believe buyers will be deterred. Still, higher mortgage rates have consequences for Long Island home seekers, who will be saddled with higher monthly payments for years to come.

A buyer using a $500,000 mortgage to purchase a home at this week's rate would pay about $3,170 a month toward principal and interest. That's an increase of about $172 a month compared with the same payment at a 6% rate.

Those higher monthly payments could exacerbate Long Island's shortage of for-sale listings, Ostrowski said, because homeowners who locked in rates around 3% are less likely to move if their potential future housing payment rises.

"Mortgage rates creeping back to 6.5% will keep a lot of those sellers on the sidelines," he said.

The median sale price of a single-family home in April was $852,000 in Nassau County and $714,900 in Suffolk County, according to the latest data from OneKey MLS, the multiple listing service that covers Long Island. Strong buyer demand has led to many houses selling for above their asking prices, and in the most competitive Suffolk County communities, more than 75% of homes sold for higher than list price in the second half of last year, a Newsday analysis found. 

One effect of rising rates is that buyers will shift their sights toward lower price points, said Lisa Zambelli, a loan officer at Cliffco Mortgage Bankers in Uniondale.

"They're not stopping buying," she said. "They're just changing their search criteria."

Zambelli, who frequently works with first-time buyers, said there has been an increased focused on property taxes since rates rose above 6% several years ago, which has made communities where taxes are lower, such as Ronkonkoma, more popular with buyers.

"It really comes down to payment," she said. "That has been the biggest change since interest rates have gone up."

Kevin Dayton, vice president of mortgage lending at CrossCountry Mortgage in Melville, said he doesn't believe the uptick in rates has deterred Long Island buyers, who have grown tired of waiting for rates to drop substantially.

"We're coming to the realization — buyers and sellers — that rates in this range are here to stay," he said.