Average long-term US mortgage rates rose this week ahead of another expected rate hike by the Federal Reserve due early next month.
Mortgage buyer Freddie Mac reported Thursday that the prime 30-year rate average rose to 6.94% this week, up from 6.92% last week. Last year at this time the rate was 3.09%.
“30-year fixed-rate mortgages remain just shy of 7% and continue to disproportionately impact the housing market as demand declines,” Sam Khatter, chief economist at Freddie Mac’s, said in a statement. “Additionally, homebuilder confidence has halved what it was just six months ago and construction, particularly single-family residential construction, continues to slow.”
Popular among those looking to refinance their homes, the average rate on a 15-year, fixed-rate mortgage rose to 6.23% from 6.09% last week. Last week it climbed more than 6% for the first time since the 2008 housing market crash. A year ago, the 15-year rate was 2.33%.
At the end of September, the Federal Reserve raised its benchmark lending rate by another three-quarters in an effort to disrupt the economy and reduce inflation. This was the Fed’s fifth increase this year and a 0.75 percent increase for the third time in a row. The Fed’s next two-day policy meeting opens on November 1, with most economists expecting another big three-quarter point increase.
Despite the Fed’s sharp and massive rate hikes, inflation has hardly risen beyond 40-year highs and the labor market remains tight.
Many potential buyers have been kicked out of the market as average mortgage rates have more than doubled this year, while home prices remain stable and properties are in short supply. Sales of previously occupied US homes fell for the eighth consecutive month in September, matching the pre-pandemic sales momentum 10 years ago.
The National Association of Realtors said Thursday that current home sales fell 1.5% from August last month to a seasonally adjusted annual rate of 4.71 million. According to FactSet, this is slightly higher than economists expected.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said, “The nearly 7% increase in mortgage rates over the past few weeks has fueled a further decline in mortgage demand, and we expect home sales to continue to decline until early next year.” ” report good.
Many analysts expect mortgage rates to continue rising. Whelan Global Advisors forecasts rates to be in double digits and home prices to fall by April 2023.
“If you’re planning on moving home and will need a new mortgage, you’re going to face a huge increase in rates,” Shepherdson said.
Around the US, typical home prices fell 0.3% from July to August and 0.1% from June to July,, This was the biggest monthly decrease since 2011.