Mortgage rates jump again, sending home buyers to the sideline

Average US long-term mortgage rates rose again ahead of next week’s Federal Reserve meeting, where it is expected to announce another big increase in its key lending rate.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate jumped to 5.23% this week from 5.09% last week. A year ago, at this time, the average rate was 2.96%. Until April, the average rate did not exceed 5% in more than a decade.

The rapid jump in rates, coupled with a sharp rise in home prices, has pushed potential buyers out of the market.

“Real estate activity is slowing in the face of higher mortgage interest rates,” Matthew Pointon, senior economist at Capital Economics, said in a report. “Mortgage applications for home purchases fell to a two-year low in May, existing home sales fell in each of the three months through April and new home sales recorded their biggest monthly decline in nearly nine years.”

Mortgage applications were down 6.5% from a week earlier, the Mortgage Bankers Association reported Wednesday. The group’s composite index, a measure of mortgage loan application volume, is at its lowest level in 22 years. Its refinancing rate is 75% lower than it was a year ago.

Housing market finally cooling off

Last month, the Federal Reserve stepped up its fight against the worst inflation in 40 years as raising your base interest rate by half a percentage point and signaling further interest rate hikes to come. The Fed’s move, the most aggressive since 2000, means higher costs for mortgages, credit cards, auto loans and other loans to individuals and businesses.

Higher loan rates appear to be real estate market downturn, an important part of the economy. In April, existing and new home sales showed signs of faltering, exacerbated by sharply higher home prices and a dwindling supply of available properties.


Federal Reserve raises interest rates to fight record inflation

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However, some economists hope that reduced demand could benefit more determined homebuyers.

“The material decline in buying activity, combined with the increase in the supply of homes for sale, will cause a slowdown in price growth to more normal levels, providing some relief for buyers still interested in buying a home,” Sam said. Khater, chief economist at Freddie Mac. .

Home ownership has become increasingly difficult lately, especially for first-time homebuyers. In addition to staggering inflation, rising mortgage rates and rising house prices, the supply of homes for sale remains scarce.

The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, rose to 4.38% from 4.32% last week.

Economists expect the Fed to raise its key interest rate by another half a point when it meets next week.

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