Home Training Average long-term mortgage rates in the US fell to 5.3%

Average long-term mortgage rates in the US fell to 5.3%


WASHINGTON (AP) — Average long-term U.S. mortgage rates fell this week just as the Federal Reserve announced another big rate hike in its bid to rein in four-decade high inflation.

Mortgage buyer Freddie Mac said Thursday that the 30-year rate fell to 5.3% from 5.54% last week. A year ago, the average rate for 30 years was 2.8%.

The average rate on 15-year fixed-rate mortgages, popular among those refinancing their homes, also fell to 4.58% from 4.75% last week. A year ago at this time, the rate was 2.1%.

The Fed raised its key lending rate by three-quarters of a percentage point on Wednesday, the second such increase in less than two months. The central bank also raised the base rate by half a point in May.

A rapid rate hike risks plunging the US economy into recession, but it is the Fed’s most powerful tool to bring price growth back to its 2% annual target.

Also on Thursday, the Commerce Department reported that the US economy shrank for the second straight quarter from April to June, contracting at a 0.9% annual rate and raising concerns that the country may be heading into recession.

The drop in gross domestic product — the broadest gauge of the economy — followed a 1.6% annualized drop from January to March, reported by the Commerce Department on Thursday. Consecutive quarters of falling GDP are one of the unofficial, though not definitive, indicators of a recession.

Over the past year, consumer prices have soared by 9.1%, the largest annual increase since 1981. The Labor Department’s producer price index, which measures inflation before it reaches consumers, rose 11.3% in June from a year earlier.

Higher borrowing rates have scared away house hunters and cooled the red-hot housing market, one of the most important sectors of the economy. Earlier this month, the National Association of Realtors reported that US pre-occupied home sales slowed for the fifth consecutive month in June.

Home prices continued to rise last month – albeit at a slower pace than earlier this year – even as sales slowed. The national median home price jumped 13.4% year-over-year in June to $416,000. According to data for 1999, this is an all-time high, according to the NAR.

The Mortgage Bankers Association said Wednesday that mortgage applications fell 18% from a year ago and refinances fell 83% to the lowest in more than two decades.

Layoffs in the housing sector have already begun. Among those that have announced job cuts in recent months are online mortgage company loanDepot, online real estate brokerage Redfin and Compass.

The nation’s largest bank by assets, JPMorgan Chase, has laid off hundreds of employees in its mortgage division and reassigned hundreds of others to work in other parts of the firm.


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