Mortgage Rates Hit New Highs Amid Fed Rate Hike
US mortgage rates have reached their highest level in over 19 months, rising to just below 7% this week. The weekly average rate on a 30-year fixed-rate home loan climbed to 6.95%, up from 6.76% last week and significantly higher than the 6.26% rate seen one year ago.
The ongoing rise in mortgage rates is putting further pressure on a bleak housing market, which has been stuck in a rut this year due to rising borrowing costs. Higher mortgage rates can add hundreds of dollars a month to borrowers' costs, limiting homebuyers' purchasing power and leading prospective buyers to delay their purchases.
The current average rate translates roughly into an additional $255 a month cost for a borrower financing a $400,000 home loan at the current rate. According to Lisa Sturtevant, chief economist at Bright MLS, 'The rate hike all but guarantees that mortgage rates will remain stuck at or above the 7% threshold...'
The Federal Reserve's decision to increase its key interest rate for the first time in three years is also expected to put upward pressure on mortgage rates. The Fed's move signals that another rate hike could occur later this year, which may further slow down the housing market.