US mortgage interest rates reach a 12 year high, demand falters
The average interest rate on the most popular US home loan has climbed to a 12-year high with fewer homebuyers seeking properties in a sign that the Federal Reserve's aim of cooling the housing market may be beginning to bite.
According to data from the Mortgage Bankers Association (MBA) released on Wednesday, the average contract rate on a 30-year fixed-rate mortgage increased to 5.20% in the week ended April 15 from 5.13% a week earlier.
The bulk of the run-up, however, has occurred since the start of the year, causing the fastest climb in home-financing costs in decades as the Fed abandoned a cautious approach to raising its benchmark overnight lending rate in favor of swifter and more decisive action to bring down persistently high inflation.
A year ago, the benchmark 30-year fixed-rate mortgage was at 3.27 percent. Almost a month ago, the rate was 4.4 percent.
The central bank is also set to decide at its next meeting on May 3-4 to begin reducing its portfolio of $8.5 trillion of US Treasuries and mortgage-backed securities, a stash of assets that had helped keep consumer borrowing costs - for mortgages in particular - low throughout the COVID-19 pandemic, said a report in Reuters.
Those expectations for Fed tightening actions have led to a surge in Treasury yields as financial markets reacted. The yield on the 10-year note US10YT=RR, which acts as a benchmark for mortgage rates, is at its highest level since 2018.
The latest increase in home-financing costs also led to fewer mortgage applications last week following a small bump in demand the prior week as buyers rushed to lock in rates before they moved higher.
The MBA said its Purchase Composite Index, a measure of all mortgage loan applications for the purchase of a single-family home, fell 3.0% on a seasonally adjusted basis to 254.0, while the refinance index fell 8%.
According to Freddie Mac, mortgage rates surged through the first quarter of 2022. The 156 basis point (1.56%) gain represented the fastest three-month rise since May 1994.
Experts from the Mortgage Bankers Association, First American, and other industry leaders expect 30-year mortgage rates to keep climbing in May — though perhaps not as quickly as they have over the past month, said a report in The Mortgage Reports.
(Source: Press TV and Agencies)
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