Posted on 08/25/23
| News Source: Associated Press
The average long-term U.S. mortgage rate climbed further above 7% this week to its highest level since 2001, another blow to prospective homebuyers grappling with rising home prices and a stubbornly low supply of properties on the market.
Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan jumped to 7.23% from 7.09% last week. A year ago, the rate averaged 5.55%.
It’s the fifth consecutive weekly increase for the average rate, which is now at its highest level since early June 2001, when it averaged 7.24%. Back then, the median sales price of a previously occupied U.S. home was $157,500. As of last month, it was $406,700.
High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already unaffordable to many Americans. They also discourage homeowners who locked in low rates two years ago from selling.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, also rose to 6.55% from 6.46% last week. A year ago, it averaged 4.85%, Freddie Mac said.
Mortgage rates have been rising along with the 10-year Treasury yield, which is used by lenders to price rates on mortgages and other loans.
The yield, which earlier this week neared its highest level since 2007, has been climbing as bond traders react to more reports showing the U.S. economy remains remarkably resilient. That’s stoked worries that the Federal Reserve will conclude that it needs to keep interest rates higher for longer in order to crush inflation.
The central bank has already raised its main interest rate to the highest level in 22 years in hopes of grinding down high inflation, which has cooled considerably since peaking above 9% last summer. Still, inflation remains above the Fed’s 2% target.
“This week, the 30-year fixed-rate mortgage reached its highest level since 2001 and indications of ongoing economic strength will likely continue to keep upward pressure on rates in the short-term,” said Sam Khater, Freddie Mac’s chief economist.