The average interest rate on the most popular US home loan surged to its highest level since 2001. The surge was caused by the tightening financial conditions weighing on the housing sector, as highlighted by data acquired from the Mortgage Bankers Association (MBA) on October 26, 2022.
Notably, the average contract rate on a 30-year fixed-rate mortgage surged by 22 basis points to reach 7.16% for the week that ended on October 21 while the MBA’s Market Composite Index, a definite measure of mortgage loan application volume, lost 1.7% from a week earlier. Mortgage application operations are at their slowest pace since 1997.
Mortgage rates have already more than doubled since the start of the year, as the Federal Reserve pursues an aggressive path of interest rate hikes to control the consistently high inflation. The central bank is now expected to raise rates by 0.75% for a fourth consecutive time at the end of the next policy meeting on November 1-2.
These actions are meant to cool the economy sufficiently to combat price pressures. But, they have weighed massively on the interest-rate-sensitive housing industry as expectations for Fed tightening have resulted in a spike in Treasury yields.
The yield on the 10-year note acts as a benchmark for mortgage rates.
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