Following a massive leap last week, the largest in 35 years, the average long-term mortgage rate in the United States grew a little bit this week.
Washington, D.C. Following a massive leap last week, the largest in 35 years, the average long-term mortgage rate in the United States grew a little bit this week.
The 30-year rate increased slightly this week from last week's 5.78% to 5.81%, according to mortgage buyer Freddie Mac's report on Thursday. The average for last week increased by more than a half-point over the previous week, making it the biggest since the housing crisis in November of 2008. The typical 30-year rate was 3.02% a year ago.
The typical interest rate for 15-year fixed-rate mortgages, which are popular among homeowners refinancing, increased from 4.81% last week to 4.92% this week. The rate was 2.34% a year ago.
The Federal Reserve increased its key interest rate by three-quarters of a point last week, the largest such increase since 1994.
After government data revealed that U.S. inflation increased in May to a four-decade high of 8.6%, the Fed raised interest rates in an exceptionally substantial manner. The benchmark short-term rate set by the Fed, which affects many consumer and corporate loans, will now be in the 1.5% to 1.75% range, and Fed members anticipate that range to double by the end of the year.
The housing sector, a crucial economic pillar, appears to be slowing down as a result of higher borrowing rates.
Because of rising mortgage rates and record-high property prices, home sales in the United States fell for the fourth straight month in May. According to the National Association of Realtors, existing home sales dropped 3.4% from April to a seasonally adjusted annual pace of 5.41 million last month.
In May, home prices continued to rise despite a slowdown in home sales. From a year earlier, the national median home price increased 14.8% in May to $407,600. NAR noted that based on data going back to 1999, that represents an all-time high.
Potential homebuyers are being pushed out of the market by the rapid rise in rates and the dramatic rise in home prices. According to the Mortgage Bankers Association, mortgage applications are down more than 10% from last year, while refinancings are down 77%.
With further Fed rate increases almost probable and the housing sector already experiencing layoffs, those numbers are likely to get worse. Redfin, an online real estate brokerage, has said so far this month that it will be letting go of 8% of its staff, while Compass will be letting go of 450.
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