The average interest rate on U.S. home loan rose above 6% for the first time since 2008;

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Now more than double the level it was one year ago, Mortgage Bankers Association (MBA) data showed on Wednesday.

Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs in order to tame high inflation. The central bank has raised its benchmark overnight lending rate by 225 basis points since March.

Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year. The yield on the 10-year note acts as a benchmark for mortgage rates.

The average contract rate on a 30-year fixed-rate mortgage rose by 7 basis points to 6.01% for the week ended Sept. 9, a level not seen since towards the end of the financial crisis and Great Recession.

The MBA also said its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is now down 64.0% from one year ago.

Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to one year ago.

A worse-than-expected key inflation reading on Tuesday cemented expectations the Fed will be forced to deliver a third straight 75-basis point interest rate hike at its policy meeting next week, with investors now predicting the central bank will have to hike rates faster and further than previously thought.

The impact of higher interest rates is being felt across the housing sector. New home sales plunged to a 6-1/2-year low in July while home resales and single-family housing starts are at two-year lows. But house prices remain elevated amid a critical shortage of affordable homes, making a housing market collapse unlikely.

Housing economists see rates rising, but the question is how much. “Rates will continue this march higher well into the future until inflation and debt spending are back under control,” says Derek Egeberg of Academy Mortgage in Yuma, Arizona.

Economists had expected rates to rise by the end of 2022, but the roller coaster ride in recent weeks has many forecasters wondering what comes next. As mortgage rates flirt with the 6 percent barrier, competition among homebuyers could ease further. It remains to be seen how home sales activity shakes out for the remainder of the year.

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