LOS ANGELES — The average US long-term mortgage rate rose this week to just under 7%, its highest level since November and the latest setback for homebuyers already struggling with a tough housing market. due to a shortage of homes for sale.
Mortgage buyer Freddie Mac said on Thursday that the average rate on a benchmark 30-year home loan rose to 6.96% from 6.81% last week. A year ago, the average rate was 5.51%.
This is the third week in a row of higher interest rates, bringing the average rate to its highest level since rising to 7.08% in early November. High interest rates can add hundreds of dollars in costs per month. months for borrowers, limiting how much they can afford in a market that is already too expensive for many Americans.
The latest rate hike comes after a recent sharp rise in 10-year Treasury yields, which rose above 4% last week for the first time since early March. Yields, which lenders use to price rates on mortgages and other loans, fell to 3.80% in midday trading Thursday after new data pointed to inflation. lower, prompting bond traders to cut bets for the Federal Reserve to raise interest rates more later this year.
On Wednesday, the US government reported that consumer-level inflation rose 3% in June from a year earlier, marking the lowest level since early 2021, though it remains higher. Fed’s 2% target.
Sam Khater, chief economist at Freddie Mac, said: “Incoming data shows inflation is softening slightly, falling to an annual low in more than two years. “However, the increase in housing costs, which accounts for a large part of inflation, remains high, mainly due to low inventories relative to demand.”
High inflation has led the Federal Reserve to raise interest rates at breakneck speed. Beginning with its first rate hike in March 2022, the central bank raised its benchmark interest rate to around 5.1%, a 16-year high, before abandoning the hike at its meeting. policymakers last month.
Mortgage rates don’t necessarily reflect Fed rate hikes, but tend to track 10-year Treasury yields. Investors’ expectations about future inflation, global demand for US Treasuries, and what the Fed does with interest rates can all affect home loan rates.
The average interest rate on a 30-year mortgage is still more than double what it was two years ago, when ultra-low interest rates fueled a wave of home sales and refinancing. Much higher rates today are contributing to the low levels of available homes by discouraging homeowners who have locked in lower loan costs two years before selling.
The scarcity of real estate in the market is also a major reason for slowing home sales this year. Last month, sales of previously occupied U.S. homes fell 20.4% year-over-year, marking 10 straight months of annual declines of 20% or more, according to the National Association of Realtors. family.
The average rate on 15-year fixed-rate mortgages, popular with people refinancing their homes, also increased this week, rising to 6.30% from 6.24% in January. last week. Freddie Mac said a year ago the average was 4.67%.