Average long-term U.S. mortgage rates jumped ahead of next week’s Federal Reserve meeting, where it is expected to announce another big hike 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 had not exceeded 5% for more than a decade.
Rapidly rising rates, along with sharply rising house prices, have pushed potential buyers out of the market.
Mortgage applications were down 6.5% from the previous week, the Mortgage Bankers Association reported on Wednesday. The group’s composite index, a measure of the volume of mortgage applications, is at its lowest level in 22 years. Its refinancing index is 75% lower than a year ago.
Last month, the Federal Reserve stepped up its fight against the worst inflation in 40 years by raising its benchmark interest rate by half a percentage point and signaling more significant rate hikes to come. The Fed’s move, its most aggressive since 2000, means higher costs for mortgages as well as credit cards, auto loans and other borrowing for individuals and businesses.
Rising borrowing rates appear to be slowing the housing market, an important part of the economy. In April, sales of existing homes and new homes showed signs of losing momentum, aggravated by the sharp rise in house prices and a reduced supply of available properties.
However, some economists expect lower demand to benefit more determined home buyers.
“The significant decline in buying activity, combined with the increased supply of homes for sale, will cause price growth to decelerate to more normal levels, providing some relief to buyers still interested in the market. ‘buying a house,’ said Freddie Mac chief economist Sam Khater. .
Home ownership has become increasingly difficult lately, especially for first-time buyers. Along with skyrocketing inflation, rising mortgage rates and soaring home prices, the supply of homes for sale continues to be tight.
The average rate on 15-year fixed-rate mortgages, popular among 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 point when it meets next week.