US Mortgage Rates Climb Above 6% For First Time Since 2008
Mortgage rates in the U.S. topped 6% for the first time in nearly 14 years.
(Bloomberg) -- Mortgage rates in the US topped 6% for the first time in nearly 14 years.
The average for a 30-year loan jumped to 6.02% from 5.89% last week, Freddie Mac said in a statement Thursday. The last time rates were above 6% was in November 2008, the company’s data show.
This year’s rapid rise in borrowing costs has slammed the brakes on the US housing market, sidelining potential buyers, crimping sales and slowing price growth. Weakening demand has forced lenders including Citigroup Inc. to cut jobs and spurred warnings from bank executives about falling revenue from the mortgage business.
“A 6% mortgage rate isn’t just a psychological threshold, it is a major threshold of affordability, particularly for first-time homebuyers,” said Greg McBride, chief financial analyst at Bankrate.com. “The increase in mortgage rates since the beginning of the year has had the same impact on affordability as a 28% increase in home prices -- and that’s on top of the already heady appreciation seen the past couple of years.”
The Federal Reserve has been seeking to cool certain parts of the economy including housing. Inflation in August ran hotter than expected, boosting expectations of bigger interest rate hike from the central bank. That sent US Treasury yields rising Tuesday after the data were released.
“Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week,” Sam Khater, Freddie Mac’s chief economist, said in the statement. “Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”
Freddie Mac’s results have lagged behind other mortgage surveys that had already been showing rates above 6%. Mortgage News Daily reported an average of 6.3% for 30-year, fixed loans, up from 6.12% last week.
Read more: The World’s Hottest Housing Markets Are Facing a Painful Reset
(Updates with comment from analyst in fourth paragraph.)
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