WASHINGTON– Average long-term mortgage rates in the United States rose this week for the sixth straight week, marking new highs not seen in 15 years, before a housing market crash triggered the Great Recession.
Mortgage buyer Freddie Mac reported on Thursday that the 30-year average key rate had climbed to 6.70% from 6.29% last week. In contrast, the rate stood at 3.01% a year ago.
The average rate on 15-year fixed-rate mortgages, popular among those looking to refinance their homes, jumped to 5.96% from 5.44% last week.
Rapidly rising mortgage rates threaten to marginalize even more buyers after more than doubling in 2022. Last year, would-be buyers were eyeing rates well below 3%.
Freddie Mac noted that for a typical mortgage amount, a borrower who has stuck at the upper end of the weekly rate range over the past year would pay several hundred dollars more than a borrower who is immobilized at the lower end of the range.
Last week, the Federal Reserve raised its benchmark borrowing rate by another three-quarters of a point in an effort to rein in the economy, its fifth increase this year and its third consecutive increase of 0.75 percentage points.
Perhaps nowhere is the effect of Fed action more apparent than in the housing sector. Sales of existing homes have been falling for seven straight months as rising borrowing costs put homes out of reach for more people.
The government announced on Thursday that the US economy, battered by soaring consumer prices and rising interest rates, contracted at an annual rate of 0.6% from April to June. This was unchanged from the previous estimate for the second quarter.
Fed officials predict they will raise their benchmark rate further to around 4.4% by the end of the year, one point higher than they had envisaged last June. And they expect to raise the rate again next year, to around 4.6%. It would be the highest level since 2007.
By raising borrowing rates, the Fed is making it more expensive to take out mortgages and car or business loans. Consumers and businesses are likely to borrow and then spend less, which cools the economy and slows inflation.
Mortgage rates do not necessarily reflect Fed rate hikes, but tend to track the yield of the 10-year Treasury. This is influenced by a variety of factors, including investor expectations for future inflation and global demand for US Treasuries.