The rate on a 30-year fixed-rate mortgage rose above 5%, higher than it has been in years, as the Federal Reserve moves to tighten monetary policy quickly.
The average rate is now at 5.02%, according to Mortgage News Daily. That is the highest rate for a 30-year mortgage since rates crossed beyond 5% for a couple of days in 2018, and, before that, since 2011.
Mortgage rates have been exploding upward since the start of the year when it became apparent that inflation was rising fast and, as a result, the Fed would have to act more quickly in hiking its interest rate target. Last month, the central bank raised its interest rate target by a quarter percentage point, and it is expected to hike even more aggressively at its next meeting.
RISING MORTGAGE RATES COULD BEGIN TO COOL A STILL-HOT HOUSING MARKET
The huge rise in mortgage rates has made housing less affordable for home buyers. The payment on a typical mortgage loan grew by about $500 per month just in the past few weeks, Freddie Mac’s deputy chief economist said late last month. Inflation-adjusted mortgage payments are also at their highest level in more than two decades.
The skyrocketing mortgage rates came after a period of ultra-low mortgage rates last year as the housing market became red hot and home prices soared. The record-low rates encouraged some consumers to purchase homes. Recent data, though, show that the higher mortgage rates might have begun dinging home sales.
New home sales fell 2% in February to 772,000, according to a report from the Census Bureau released on Wednesday. The news comes after sales dropped 4.5% in January, which was a bigger decline than expected.
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Existing-home sales declined by 7.2% in February to a seasonally adjusted annual rate of 6.02 million, according to a report by the National Association of Realtors released last month.
In a recent interview with the Washington Examiner, Gay Cororaton, NAR’s housing and commercial research director, said she expects that mortgage rates could pop up to 6% by the end of next year, their highest level since the middle of the Great Recession.