The average interest rate on the most attractive U.S. home loan jumped above 6% for the first time since 2008 and is currently more than twice the level it was a year earlier, as shown by Mortgage Bankers Association (MBA) data on September 14.
High mortgage rates are progressively pressing down on the interest-rate-sensitive housing sector as the Federal Reserve continues to aggressively raise borrowing costs in order to contain soaring inflation. The central bank has lifted its benchmark overnight lending rate by 225 basis points since March.
Projections for Fed tightening have led to a climb in Treasury yields since the beginning of 202. The yield on the 10-year note serves as a benchmark for mortgage rates.
The average contract rate on a 30-year fixed-rate mortgage jumped by 7 basis points to 6.01% for the week ended Sept. 9, a level not witnessed since towards the end of the financial crisis and Great Recession.
This MBA also said its Market Composite Index, a measure of mortgage loan application volume, fell 1.2% from the previous week and is currently down 64.0% compared to a year earlier. Its Refinance Index dropped 4.2% from a week earlier and was down 83.3% from a year earlier.Buy Bitcoin Now
A worse-than-anticipated key inflation reading on Tuesday fueled expectations the Fed will be compelled to implement a third consecutive 75-basis point interest rate hike at its policy meeting next week, with investors now forecasting the central bank will have to raise rates faster and further than previously expected.
The effect of rising interest rates is being experienced across the housing sector. New home sales fell to a 6-1/2-year low in July while home resales and single-family housing starts hit two-year lows. But house prices remain strong amid an extreme shortage of affordable homes, causing a housing market crash unlikely.