The average 30-year fixed rate mortgage for the week to June 16 was 5.78%, up from 5.23% last week. Interest rates have risen by more than 2.5 percentage points this year. Last year’s average this time was 2.93%.
“These high interest rates are the result of changing expectations of inflation and the direction of monetary policy,” said Sam Carter, chief economist at Freddie Mac. “Higher mortgage rates will ease the blazing pace of housing activity that has experienced a pandemic break, ultimately leading to a more balanced housing market.”
Interest rates have risen sharply since January, and housing funding costs have risen significantly.
Buyers are finding homes at a more affordable price, as inflation has taken a larger portion of their income and the cost of renting has reduced their purchasing power.
A year ago, a buyer who reduced a median $ 390,000 home by 20% and financed the rest with a 30-year fixed rate mortgage with an average interest rate of 2.93% paid $ 1,304 monthly mortgages. Freddie Mac.
Today, homeowners who buy an average of 5.78% of homes at the same price will pay $ 1,827 per month in principal and interest. According to Freddie Mac figures, this is $ 523 more each month.
The Federal Reserve does not set interest rates for borrowers to pay directly on mortgages, but their behavior affects mortgages. Mortgage rates tend to track 10-year US Treasury bonds. However, mortgage rates are indirectly affected by the Fed’s actions on inflation. When investors see or anticipate rate hikes, they often sell government bonds. It sends higher yields, along with mortgage rates.
Investors expected a rate hike on Wednesday, raising the 10-year financial yield on Tuesday to 3.48%. This is the best in 11 years.
Soaring interest rates have the effect of putting a brake on the housing market, which has been moving fast for the past two years.
Hannah Jones, an economic data analyst at Realtor.com, said: “In the grocery store, pumps, and both the retail and rental markets, American consumers had little reassurance.”