Fed Hike Sparks Mortgage Rate Surge Amid Ongoing Affordability Concerns

The Federal Reserve has raised its benchmark interest rate for the first time in three years to combat stubbornly high inflation. The quarter-point increase lifts the Fed's key rate to about 3.9%, which could result in higher borrowing costs for mortgages, auto loans, and credit cards.

Home shoppers are facing a long wait for relief from rising mortgage rates, as the weekly average rate on a 30-year fixed-rate home loan has climbed to just below 7%, its highest level in over 19 months. The benchmark 30-year fixed rate mortgage rose to 6.95% from 6.76% last week.

Retail sales have seen a better-than-anticipated pace in August, with consumers stepping up their spending after an unexpectedly sharp pullback in July. Retail sales rose 1.2% last month, while excluding business at gas stations, retail sales rose 1.1%.