Washington, DC [US], September 23 (ANI): The average US fixed 30-year mortgage rate jumped to 7.12 per cent, reaching its highest level in more than two years, according to Reuters. The surge followed a short-term policy interest rate hike by the Federal Reserve aimed at curbing persistent inflation, alongside rising oil prices that pushed up underlying residential borrowing benchmarks.
Data released on Wednesday by the Mortgage Bankers Association showed that the average contract rate on a 30-year fixed-rate loan increased by 15 basis points to 7.12 per cent during the week ended September 18. The lending rate recorded was the last higher in May 2024.
Lending costs tracked movements in US Treasury yields, which reacted to shifting oil prices and broader price pressures. Inflation continued to hold above the central bank's 2 per cent target for five and a half years.
Mortgage rates rose by more than a full percentage point since late February, when joint military actions involving the United States and Israel against Iran elevated energy markets and curtailed activity across the domestic real estate sector, Reuters reported.
Federal policymakers raised the benchmark rate last week by 25 basis points to a range between 3.75 per cent and 4.00 per cent. The adjustment sought to bring elevated consumer prices onto a more manageable trajectory.
Reuters noted that the rate decision aimed to steer inflation on a "timelier" path toward the official target of 2 per cent and nearly all Fed policymakers projected at least one more rate increase by the end of this year. Traders are also betting on further Fed rate hikes.
Financial market participants and derivative traders similarly positioned portfolios for additional monetary tightening measures before the close of the calendar year.
Reuters stated that the latest run-up in mortgage rates last week "led to a decline in refinancing and home purchase applications," prompting home buyers to look toward floating-rate alternatives to manage initial outlays.
Reuters also mentioned that higher borrowing costs "drove more borrowers into adjustable-rate mortgages, which offer lower upfront borrowing costs than fixed-rate mortgages and reset after a number of years to whatever the going rate is at the time."
The shift toward variable financing resulted in adjustable-rate products accounting for 9.8 per cent of total mortgage applications last week. (ANI)
US 30-year mortgage rate climbs to 7.12% as borrowing costs surge
