The average rate on 30-year fixed mortgages returned to its previous 20-year highs when rates crossed the 7% threshold two weeks ago for the first time in two decades. According to Bankrate’s national survey of large lenders, the average rate on 30-year mortgages increased by 0.13% over the past week, pushing rates from 6.95% to 7.08%. This is the second time 30-year mortgage rates have surpassed the 7% mark this year.
A year ago, the average long-term mortgage rate was 2.98%. Additionally, the average rate for a 15-year mortgage, famous among homeowners refinancing, increased from 6.29% to 6.38% last week. A year ago, it was only at 2.27%.
Increased Mortgage Rates Prompt a Decline in Housing Market
The current average long-term mortgage rate, along with skyrocketing property costs, has severely weakened the spending power of homebuyers. Homebuyers are currently struggling with monthly mortgage payments increased by hundreds of dollars.
Additionally, borrowing prices have grown to be a significant barrier for many Americans who are already spending more for food, petrol, and other necessities; as a result, sales of existing homes have decreased for eight consecutive months. Furthermore, many homeowners who want to relocate have put off selling their houses because they don’t want to lock in a greater rate on their next mortgage.
Real estate firms have also reduced their workforces and lowered their financial projections due to the unstable housing market. Although mortgage rates don’t always correspond with increases in Fed interest rates, they frequently follow the results on the 10-year Treasury note. These results are affected by several variables, such as demand for US Treasury bonds globally and investors’ prospects for future inflation.
Feds Lift Short Term Lending Rates by 0.75%
For the fourth time this year, the Federal Reserve increased its short-term lending rate by an additional 0.75% last week, three times the standard margin of increase. The increased rates displayed the Fed’s effort to combat inflation rates in the country.
Reports have indicated possibilities of more Fed rate hikes in the future; however, there is some optimism that the Fed will reduce its rate hikes if proof of a price peak emerges. Meanwhile, consumer inflation inched up 7.7% in just October compared to the previous year, making this its lowest yearly increase since January, according to the Labor Department’s data on Thursday, 10th November.
“Core” inflation, excluding volatile food and energy prices, increased by 6.3% over the previous 12 months. All of the figures generated came in below what economists had predicted. Fortunately, the release of Thursday’s report increased the likelihood that the Fed would decide to delay raising interest rates further, a possibility that instantly caused stock prices to soar.