The average contract rate on a U.S. 30-year fixed mortgage jumped to 6.25% last week, the fifth-straight advance and the highest since October 2008, illustrating a mounting challenge for the housing market.
Mortgage Bankers Association figures on Wednesday showed the rate climbed nearly a quarter percentage point, the most since mid-June, as Treasury yields respond to Federal Reserve policy efforts aimed at quashing inflation.
Adjustable-rate mortgages also increased, with the average contract rate on a five-year ARM jumping 31 basis points to 5.14%. Fed policy makers later on Wednesday are forecast to raise their benchmark lending rate by 75 basis points for a third straight meeting.
This year’s rapid rise in mortgage rates is cooling the U.S. housing market, leading to sales declines and pressure on home prices. Other measures of mortgage rates also put the figures above 6%. Last week, Freddie Mac’s data, which is released on Thursdays, showed that the average for a 30-year loan crossed the 6% threshold for the first time since 2008. Mortgage News Daily, which updates more frequently, puts the 30-year rate at 6.47%.
While the MBA’s weekly measure of mortgage applications increased last week from a week earlier, those for home purchases are down nearly 30% from last year while refinancing has plummeted almost 83%.
“While week-to-week movements in these data can be affected by seasonal adjustment difficulties, it is nonetheless clear that the downward trend continues for home purchase applications,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, said in a note.
The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data covers more than 75% of all retail residential mortgage applications in the U.S.
This article was provided by Bloomberg News.