Mortgage rates rose for the fifth straight week, hitting their highest level since the financial crisis.
The average interest rate on a 30-year fixed-rate mortgage rose to 6.29%, according to a survey of lenders released Thursday by Freddie Mac.
It was the second straight week that interest rates exceeded 6%. Interest rates were last this high in October 2008, when the US was deep in recession.
The sharp rise is another result of the Federal Reserve’s campaign to contain decades of high levels inflation. On Wednesday, the central bank hiked interest rates for the fifth time this year. Officials cautioned that more big hikes are on the way, even if such moves risk a recession.
A year ago, mortgage rates were 2.88%.
Higher interest rates affect virtually every corner of the economy, but their impact on home construction is particularly acute, since higher interest rates can easily add hundreds of dollars to a buyer’s monthly mortgage payments.
Consider a borrower who buys a $500,000 home with a 20% down payment. With a 2.88% mortgage, this person can expect to pay about $200,000 in interest over 30 years on their $400,000 loan, according to a Bankrate.com mortgage calculator. With a 6.29% mortgage, the borrower could pay more than $490,000 in interest.
Higher rates have significantly cooled the case. Although property prices continue to post year-on-year gains, prices are falling month-on-month. Many potential buyers are priced out of the home price. Many homeowners feel stuck because selling would mean taking out a mortgage with significantly higher interest rates.
The nationwide median mortgage payment was $1,839 in August, up 33% from the start of the year, the Mortgage Bankers Association said on Thursday.
Mortgage rates don’t automatically move when the Fed raises rates. They typically rise or fall in tandem with the benchmark 10-year Treasury yield, but that yield is heavily influenced by expectations for Fed interest rates. The 10-year yield hit its highest level since 2011 this week.
Authors: Charley Grant at email@example.com
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