US mortgage rates surged to their highest level in more than two decades at the end of last month, spurred by the Federal Reserve’s campaign to hike interest rates, Bloomberg reported on Wednesday, citing a survey by the Mortgage Bankers Association.
According to the trade body, the average 30-year fixed mortgage contract rate rose by 12 basis points in the reporting period – the most since mid-August – and hit 7.53% on Friday. The rate topped 7.5% for the first time since November 2000. This time last year, it was just over 5.5%.
In household terms, this means that while a $400,000, 30-year mortgage would have cost $1,800 a month last year, it costs nearly $1,000 more at the current rate.
Meanwhile, home-purchase applications fell 5.7% in the reporting period to the lowest level since 1995, the survey revealed.
Mortgage rates have continued to rise this week, according to Mortgage News Daily. According to its tracker, the 30-year fixed mortgage rate stood at 7.72% on Tuesday.
The US housing market has been suffering amid multiple interest rate hikes by the Federal Reserve since early last year, and more recently was also affected by a surge in bond yields.
Yields on the 10-year US Treasury bond, which affect mortgage rates and other forms of borrowing, climbed to 4.8% on Tuesday, the highest level since 2007, following the publication of labor turnover data for August. It showed a higher-than-expected number of job openings, which investors took as a sign of continued tightness in the labor market and a potential cause for further interest rate hikes.
There are currently mixed messages from the Federal Reserve on whether more interest rate increases will come this year. Most US officials expect rates to remain elevated through next year amid lingering inflationary pressures. The Fed has two remaining policy meetings in 2023.
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