WASHINGTON -- Average long-term U.S. mortgage rates rose to their highest level in two months this week, providing no relief for a slumping housing market.
Mortgage buyer Freddie Mac reported Thursday that the 30-year rate rose to 5.66% from 5.55% last week. One year ago, the rate stood at 2.87%.
The average rate on 15-year, fixed-rate mortgages, popular among those looking to refinance their homes, jumped to 4.98% from 4.85% last week. Last year at this time the rate was 2.18%.
A once red-hot housing sector has cooled considerably, with many potential home buyers getting pushed out of the market as higher interest rates have added hundreds of dollars to monthly mortgage payments. As a result, sales of existing homes in the U.S. have fallen for six straight months, according to the National Association of Realtors.
“The increase in mortgage rates is coming at a particularly vulnerable time for the housing market as sellers are recalibrating their pricing due to lower purchase demand, likely resulting in continued price growth deceleration,” said Sam Khater, Freddie Mac’s chief economist.
Mortgage rates don’t necessarily mirror the Fed’s rate increases, but tend to track the yield on the 10-year Treasury note. That's influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.
Recently, faster inflation and strong U.S. economic growth have sent the 10-year Treasury rate up sharply, to 3.24%.
The Fed has raised its benchmark short-term interest rate four times this year, and Chairman Jerome Powell said last week that the central bank will likely need to keep interest rates high enough to slow the economy “for some time” in order to tame the worst inflation in 40 years.
The government reported that U.S. economy shrank at a 0.6% annual rate from April through June, a second straight quarter of economic contraction, which meets one informal sign of a recession. Most economists, though, have said they doubt that the economy is in or on the verge of a recession, given that the U.S. job market remains robust.