Fed Hikes Interest Rate as Mortgage Rates Soar

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

In a set of quarterly projections, the Fed signaled its rate-setting committee could raise it again to 4.1% later this year. The move comes as Americans are already struggling with high costs for groceries, gas, and housing, making affordability a top concern in the upcoming midterm elections.

The weekly average rate on a 30-year fixed-rate home loan has been rising for months and climbed to just below 7%, its highest level in over 19 months. This is the fourth week in a row that mortgage rates have moved higher, with the benchmark 30-year fixed rate mortgage rising to 6.95% from 6.76% last week.