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US mortgage rates top 7 percent for first time over two decades | Business and Economy News

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Key 30-year mortgage rates soared to 7.08% this week, sharply lowering demand even as house prices continue to rise.

Average US long-term mortgage rates topped 7% this week for the first time in over 20 years. aggressive interest rate hikes intended to be tamed First inflation in 40 years.

Mortgage buyer Freddie Mac reported Thursday that the average key 30-year rate jumped to 7.08% from last week’s 6.94%. The last time average interest rates exceeded 7% was in April 2002, when the United States, still reeling from the September 11 attacks, triggered the Great Recession. It had been less than six years since the 2008 housing market crash.

At this point last year, the average interest rate on a 30-year mortgage was 3.14%.

Mortgage Bankers Association chief economist Mike Fratantoni said: “We see the surge in mortgage rates having a fairly dramatic impact on affordability in the market, slashing demand. ‘ said.

Mortgage rates have more than doubled this year, leaving many potential homebuyers on the sidelines.

Second-hand home sales are declining 8 consecutive months Because borrowing costs are too high a hurdle for many Americans who already pay a lot for food, gas, and other essentials. On the other hand, some homeowners are holding off putting their homes on the market because they don’t want to jump to higher interest rates on their next mortgage.

Mortgage rates are soaring, along with 10-year Treasury yields rising amid hopes that the Federal Reserve will continue to raise rates to keep inflation in check.

The Fed has raised key benchmark lending rates five times this year. This includes his three consecutive 0.75 percentage point rises that brought the main short-term borrowing rate into the 3% to 3.25% range, the highest level since 2008. At a meeting in late September, Fed officials expected to raise the key rate to about 4.5% by early next year.

Mortgage rates don’t necessarily reflect Fed rate hikes, but they do tend to track 10-year Treasury yields. This is influenced by a variety of factors, including investor expectations of future inflation and global demand for U.S. Treasuries.

The Fed is expected to raise the benchmark rate by another three-quarters of a percentage point at next week’s meeting. Despite rising interest rates, inflation has changed little from his 40-year high, with him above 8% at both the consumer and wholesale levels.

The Federal Reserve’s interest rate hikes show signs of cooling the economy. However, the unemployment rate has hit a 50-year low of 3.5%, layoffs remain at historically low levels and the labor market remains strong.

Rising interest rates and rising house prices

Rising mortgage rates reduce the purchasing power of homebuyers, and as a result, fewer people can afford to buy a home when home prices continue to rise, albeit more moderately than they did earlier this year.

A combination of rising interest rates and home prices has pushed homebuyers’ typical mortgage payments by hundreds of dollars higher than they were earlier this year.

Monthly payments for mid-priced homes are 78% higher than they were a year ago for buyers who can afford a 20% down payment. According to Realtor.com, this equates to his $1,000 increase in a typical mortgage last year alone.

To combat this, some homebuyers are opting for variable rate mortgages, which do not make it easier to qualify for financing, but the first number of loan terms During the year, your monthly payment will be less.

Such loans have become less attractive in recent years as average interest rates on long-term mortgages have fallen to all-time lows. But as of August, they accounted for about 20% of mortgages, according to CoreLogic chief economist Thelma Hepp.

“This speaks to the lower purchasing power consumers have to deal with due to rising mortgage rates,” she said.

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