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Mortgage Rates Hit 5.78%, Highest Level Since 2008

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US mortgage rates have reached their highest levels in over 13 years. This is the latest sign of market turmoil associated with the Fed’s mortgages. Campaign to cool inflation..

30-year fixed rate mortgage average interest rate has risen to 5.78%, mortgage finance giant

Freddie Mac

Thursday said it was the highest level since November 2008, well above the 3.11% recorded near the end of last year. Last week, Freddie Mac reported an average mortgage rate of 5.23%.

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The surge shows the largest weekly rise since 1987. It stands to increase pressure on US home prices. Affordable rate of increase and tumbling..

The Federal Reserve has raised benchmark rates to curb inflation and cool the housing market and the wider economy, a subtle dance. No one knows what the impact from higher rates will be, Some investors are worried The Fed could put the United States in recession.Wednesday, central bank Increased interest rates by 0.75 percentage pointsThe largest increase since 1994.

Mortgage rates do not change automatically when the Fed raises interest rates, but mortgage rates are significantly affected. Short-term interest rates, which are directly controlled by the Federal Reserve Board, rose 1.5 percentage points this year. Average mortgage rates have risen by nearly 2.7 percentage points, the steepest rise in decades.

Mortgage rates are closely tied to the 10-year US Treasury yield, which tends to move in tandem with expectations of the FRB’s benchmark rates. 10 year yield This week it reached its highest level since 2011 and has more than doubled this year due to increased bets on rate hikes.

Freddie’s weekly average is based on a survey of lenders. The 5.78% figure was recorded prior to the central bank’s announcement on Wednesday.

Real estate makes up a significant portion of the US economy and is particularly sensitive to interest rates. Higher mortgage rates can easily add hundreds of dollars to a buyer’s monthly payments.

Mike Fratantoni, chief economist at the Mortgage Banking Association, said the Fed “has a seriously devastating impact on the real estate market.” “Housing demand has fallen fairly sharply and commercial real estate has begun to slow.”

Despite the projected chill in the housing market in 2022, mortgage rates have skyrocketed in recent months, but US home prices are still at record highs. WSJ’s Dion Rabouin explains what is driving demand, evidence of a slowdown in the horizon, and what that means for the economy.Photo composition: Ryan Trefes

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Will changes in mortgage rates affect decision making when buying or selling a home? If so, how? Join the conversation below.

According to Realtor.com, homebuyers in May pay about $ 740 a month to finance median US homes than in May 2021, when interest rates were close to 3% and prices were low. I did.

News Corp,

He is the parent of The Wall Street Journal and runs Realtor.com.

Sale of existing homes It fell to the weakest pace in almost two years During April. However, prices continued to rise as so many buyers were competing for very few homes. Some buyers are discouraged by both the high prices and the high cost of borrowing and have stopped searching for homes altogether.

When the Covid-19 pandemic broke out, the Fed swiftly developed a monetary easing policy aimed at raising the economy. To facilitate lending, we have reduced interest rates to near zero. He also announced that he would embark on a fuss about buying assets and buy an essentially unlimited amount of mortgage bonds. Mortgage prices have risen and yields have fallen.Record low mortgage rate as a result Prompted the refinancing boom..

Currently, the Fed is also curtailing purchases of mortgage-backed securities, which are also raising interest rates. The central bank bought a mortgage of about $ 13 billion in its most recent purchase. That’s down from about $ 35 billion last month to over $ 100 billion each month for most of 2021.

“This has been brewed for a long time,” said Walt Schmidt, mortgage strategist at FHN Financial. “It’s all because the MBS market is losing a single biggest buyer,” he said, referring to mortgage-backed securities.

Investors who are still buying mortgage securities want to pay for it. Additional yields or spreads to the Ministry of Finance that require investors to own mortgage-backed securities are rising this year.

The recent rise in mortgage rates is unlikely to reverse soon. Federal Reserve Chair Jerome Powell said at a Federal Reserve meeting in July that he expected an increase of 0.5 or 0.75 percentage points.

Some lenders have already quoted rates above 6% this week.

Write to Orla McCaffrey at [email protected] And at Sam Gold Farb [email protected]

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