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The average long-term US mortgage rate hit a three-month high this week, reflecting higher Treasury yields and expectations. federal Reserve Will continue to raise its benchmark rate and keep it there till inflation subsides.
Mortgage buyer Freddie Mac reported Thursday that the benchmark 30-year average rate rose to 6.65% from 6.5% last week. The average rate a year ago was 3.76%.
The average long-term rate declined to a two-decade high of 7.08% as the Fed continued to raise its key lending rate to cool the economy and reduce four-decade high inflation.
Rates came down this winter as inflation seemed to be on a steady decline. But recent economic data still reveal a overheating economy and stubborn inflation. The recent surge in mortgages couldn’t come at a worse time for the recessionary housing market, which is on the verge of its spring buying season.
At its first meeting of 2023 in February, the Fed raised its benchmark lending rate by another 25 basis points, its eighth increase in less than a year. This pushed the central bank’s key rate into a range of 4.5% to 4.75%, its highest level in 15 years.
Fed Chair Jerome Powell It noted at the time that some measures of inflation have come down, but it appears he expects two additional quarter-point rate hikes this year. The minutes of that meeting released last week mostly confirmed that outlook, but the re-emergence of higher prices coupled with some strong economic reports in recent weeks has some analysts predicting more than two rate hikes this year. , including maybe another half point increase. 5.25% to 5.5%.
While Fed rate hikes affect lending rates for businesses and households, rates on 30-year mortgages typically track movements in the 10-year Treasury yield, which lenders use as a guide for pricing loans. use in Investors’ expectations for future inflation, global demand for US Treasuries and what the Federal Reserve does with interest rates can also affect the cost of borrowing for a home.
In recent days, the 10-year Treasury yield climbed back above 4% for the first time since November.
Big increases in mortgage rates over the past year have battered the housing market, with sales of existing homes falling for 12 months in a row, at their slowest pace in more than a dozen years. The National Association of Realtors reported Tuesday that January sales were down about 37% from a year ago.
For all of 2022, NAR reported last month that existing US home sales are set to fall 17.8% from 2021, the weakest year for home sales since 2014 and the largest annual decline since the housing crisis began in 2008.
Higher rates can add hundreds of dollars a month in costs for homebuyers on top of already high home prices. This has put many potential buyers, especially first-timers, on edge.
The higher rates are also driving home owners seeking to relocate or upgrade their living space as they do not want to incur higher rates than what they are currently paying off.
The rate for the 15-year mortgage popular with those refinancing their homes rose last week to 5.89% from 5.76%. A year ago it was 3.01%.
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