Due to the United States Federal Reserve raising its key rate by three-quarters of a point this week in a bid to tame high inflation the average long-term U.S. mortgage rates had their biggest one-week jump in 35 years, climbing from 5.23% last week to 5.78% this week, the highest its been since November of 2008 during the housing crisis.
Wednesday’s rate hike by the Fed was its biggest in a single action since 1994. The US central bank raised the benchmark borrowing rate on Wednesday by 0.75 percentage points, bigger than the telegraphed half-point increase after economic data in recent days showed inflation strengthening and consumer confidence weakening.
Mortgage buyer Freddie Mac reported on Thursday that the brisk jump in rates, along with a sharp increase in home prices, has been pushing potential homebuyers out of the market.
Mortgage applications are down more than 15% from last year and refinancings are down more than 70%, according to the Mortgage Bankers Association. Those figures are likely to worsen with more Fed rate increases a near certainty.
Higher borrowing rates appear to be slowing the housing market. Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates increased, driving up borrowing costs for buyers as home prices soared.
Homeownership has become invariably difficult nowadays, especially for first-time buyers. Besides high inflation, rising mortgage rates and increasing home prices, the supply of homes for sale continues to be limited.
(with inputs from agencies)
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