Mortgage rates increased by more than half a percentage point this week in the middle increasing inflation and an interest rate hike by the Federal Reserve reveals Freddie Mac. The hike is the largest one-week rise since 1987.
The 30-year fixed-rate mortgage averaged 5.78% in the week ending June 16, spiking from 5.23% the week before. Rates have increased more than two-and-a-half percentage points this year. Last year, they were at an average of 2.93%.
“These higher rates are the result of a shift in expectations about inflation and the course of monetary policy,” said Sam Khater, Freddie Mac’s chief economist.
Rates have surged since January, boosting the price of financing a home significantly.
Consumers are finding homes even less affordable as inflation secures a larger chunk of their income and the price of borrowing has lessened their purchasing power.
A year back, a buyer who invested 20% down on a median-priced US$ 390,000 home and financed the residual with a 30-year, fixed-rate mortgage at an average interest of 2.93% had a monthly mortgage payment of US$ 1,304, as per numbers from Freddie Mac.
The average mortgage rate increased this week, in response to worse-than-expected inflation data last week and in the prediction of Federal Reserve rate hikes that were announced Wednesday.
The Federal Reserve does not fix the interest rate borrowers pay on mortgages directly, but its activities impact them. Mortgage rates tend to track a decade of US Treasury bonds. As Investors anticipate rate rise, they sell government bonds, which fetched yields higher and with it, mortgage rates.
Increasing rates that the impact of putting the brakes on the housing market, which is moving at a high speed ahead for the last 2 years.