For the first time since the 2008 housing meltdown, average long-term mortgage rates in the United States surpassed 6% this week, threatening to keep even more homebuyers out of a rapidly cooling housing market.
According to Freddie Mac, the 30-year mortgage rate jumped to 6.02% on Thursday, up from 5.89% the previous week.
The long-term average rate has more than quadrupled in a year and is at its highest level since November 2008, shortly after the housing market collapse began the Great Recession. A year ago, the rate was 2.86%.
Rising interest rates, caused partly by the Federal Reserve’s vigorous anti-inflationary campaign, have cooled a housing market that has been hot for years.
Many prospective house buyers are being priced out of the market as rising interest rates add hundreds of dollars to monthly mortgage payments.
According to the National Association of Realtors, existing house sales in the United States have declined for six months.
The average rate for 15-year fixed-rate mortgages, popular among house buyers looking to refinance, increased to 5.21% from 5.16% last week. At the same time the previous year, the rate was 2.19%.
Mortgage rates tend to match the yield on the 10-year Treasury note rather than the Fed’s rate rises.
Many factors influence this, including investors’ forecasts for future inflation and global demand for US goods. Treasurys.
Recent higher inflation and robust US economic growth have pushed the 10-year Treasury yield to 3.45%.
The Federal Reserve has raised its benchmark short-term interest rate four times this year. Chairman Jerome Powell stated that the central bank would likely need to keep interest rates high enough to slow the economy “for some time” to contain the worst inflation in 40 years.
More inflation data this week indicate that, while petrol prices have fallen dramatically since early this summer, prices for most other needs have increased, alarming investors who anticipate a recession if the Fed continues to raise rates.
Most analysts predict that the Fed will raise its prime lending rate by three-quarters of a point when its policymakers meet next week.
Some fear the Fed will raise rates by a complete end after two consecutive three-quarter-point hikes in its last two sessions.
According to the government, the U.S. economy fell at a 0.6% annual rate from April to June, the second consecutive quarter of economic loss, which fits one informal sign of a recession.
Most analysts, however, believe that the economy is not in or on the approach of a downturn, given that the job market in the United States remains strong.
Despite the Fed’s measures to contain inflation, which tends to cool the labor market, applications for unemployment benefits fell again last week and remain at their lowest level since May.