Mortgage Rates Hit 7.28%, Tightening Squeeze on North Side Buyers

Oct 5

2 min read

(Above) Chicago’s Lake View neighborhood, where tight inventory has helped push median North Side home prices up 10.9% this year despite rising mortgage rates. Photo by 606 Vision.

By Don DeBat

A volatile mix of climbing interest rates and historically lean housing inventory is creating an increasingly steep climb for prospective homeowners across Chicago’s North Side and lakefront neighborhoods.

For Chicago buyers seeking the American Dream of homeownership, the latest economic indicators offer little relief.

Benchmark 30-year fixed home loans rose to 7.28% as of October 1, up sharply from 7.03% the week before, according to Freddie Mac’s Primary Mortgage Market Survey. A year ago, the 30-year average stood at 6.34%.

The 15-year fixed mortgage also climbed, rising to 6.60% from 6.42% a week earlier (compared to 5.55% a year ago).

In the Chicago market, those rate hikes collide directly with tight inventory. On the Near North Side, Gold Coast, Lincoln Park, and Lake View, median home prices are up 10.9% year-to-date, according to the September Baird & Warner North Side Chicago Market Analysis reported by broker John Irwin. Listings fell 18.4% in August, while closed sales dropped 14%.

While Freddie Mac chief economist Sam Khater noted that the market “continues to be supported by favorable economic conditions,” market watchers point to persistent headwinds. With oil prices volatile and inflation lingering, bond yields have pressured lending benchmarks across the board.

“Rates are tied to the bond market,” said Jeremy Rose (left), a senior loan officer with Lower Mortgage. “The market remains volatile, and there is general uncertainty as to what’s next.”

Forecasting the cycle has proven elusive. Lawrence Yun, chief economist for the National Association of Realtors, previously projected benchmark 30-year loans would settle near 6.5% this year—a target outpaced by persistent inflation.

For prospective buyers looking to mitigate higher borrowing costs, Rose points to rate buy-downs. On a $400,000 purchase with 25% down ($300,000 loan balance) at 7.25%, paying one discount point ($3,000 upfront) can lower the rate to roughly 6.875%.

“Aspiring buyers should remember shopping around for the best mortgage rate and getting multiple quotes can potentially save them thousands,” noted Khater (right).

Borrowers should also note that standard credit scoring models count multiple mortgage inquiries within a 14- to 45-day window as a single pull, allowing shoppers to compare lender terms without repeatedly damaging their credit score.

Don DeBat is the co-author of Escaping Condo Jail, the definitive guide to condominium living. A veteran real estate voice, he provides essential insights for navigating communal ownership. Find more survival strategies at escapingcondojail.com and stay updated on housing news at dondebat.biz. Don is currently writing Chicago’s Game, a look at the history of 16-inch softball.