Washington (AP) — US average long-term mortgage rates have risen by the largest week in 35 years, and this week the Federal Reserve has raised key rates by three-quarters to curb high inflation. ..
Mortgage buyer Freddie Mac reported Thursday that 30-year interest rates rose from 5.23% last week to 5.78% this week. This is the highest since November 2008, the time of the housing crisis.
The Federal Reserve’s rate hike on Wednesday was the largest single action since 1994.
Along with the sharp rise in home prices, the sharp rise in interest rates is pushing potential home buyers out of the market. According to the Mortgage Bankers Association, mortgage applications have fallen by more than 15% and refinancing has fallen by more than 70% since last year.
These numbers are likely to get worse and are almost certain as the Fed’s rate hikes increase.
The Fed’s extraordinarily large rate hike has taken place after data released last week showed that US inflation rose to a 40-year high of 8.6% last month. The Fed’s benchmark short-term interest rates, which affect many consumer and corporate loans, are fixed in the range of 1.5% to 1.75%, and Fed policy makers predict that the range will double by the end of the year. ..
Rising borrowing rates appear to be slowing the housing market, which is an important part of the economy. Soaring mortgage rates slowed sales of previously occupied US homes for the third straight month, and soaring home prices led to higher borrowing costs for potential buyers.
On Tuesday, online real estate broker Redfin said it has fired 8% of its workers under pressure from the chilling housing market. On the same day, the compass announced a 10% severance, the New York Times reported.
Home ownership has become increasingly difficult these days, especially for first-time buyers. In addition to tremendous inflation, rising mortgage rates, and rising home prices, the supply of homes for sale continues to be in short supply.
The average interest rate on 15-year fixed-rate mortgages, which are popular for refinancing homes, rose from 4.38% last week to 4.81%. One year ago, the percentage was 2.24%.