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Long-term U.S. mortgage rates post biggest one-week rise in 35 years after Fed rate hike


Due to the US Federal Reserve raising its key interest rate by three-quarters of a point this week in an effort to rein in high inflation, average long-term US mortgage rates saw their biggest jump in a year. week in 35 years, rising from 5.23% last week to 5.78% this week, the highest since November 2008 during the housing crisis.

Wednesday’s rate hike by the Fed was its largest in a single action since 1994. The U.S. central bank on Wednesday raised the benchmark borrowing rate by 0.75 percentage points, which is higher than the telegraphed increase of half a point after economic data in recent days showed strengthening inflation and weakening consumer confidence.

Mortgage buyer Freddie Mac reported on Thursday that rapidly rising rates, along with a sharp rise in home prices, have pushed potential buyers out of the market.

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Mortgage applications are down more than 15% from a year ago and refinances are down more than 70%, according to the Mortgage Bankers Association. Those numbers are likely to get worse with more Fed rate hikes, a virtual certainty.

Rising borrowing rates appear to be slowing the housing market. Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates rose, pushing up borrowing costs for buyers as home prices soared.

Home ownership has become invariably difficult these days, especially for first-time buyers. Along with high inflation, rising mortgage rates and rising house prices, the supply of homes for sale remains limited.

(with agency contributions)

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Post expires at 5:21pm on Sunday June 26th, 2022