US long-term average mortgage rates rise to 5.54%

WASHINGTON — U.S. long-term average mortgage rates rose again this week in a rapidly cooling housing market as the Federal Reserve braces for what could be another hike in its benchmark interest rate.

Mortgage buyer Freddie Mac reported on Thursday that the 30-year rate rose to 5.54%, from 5.51% last week. A year ago the average rate at 30 years was 2.78%.

The average rate on 15-year fixed-rate mortgages, popular with home refinancers, rose to 4.75% from 4.67% last week. Last year at this time the rate was 2.12%.

Most economists expect the Federal Reserve to raise its lending rate by between a half point and three-quarters of a point when it meets next week. Fed policymakers have signaled that much higher interest rates may be needed to rein in stubborn four-decade high inflation. The central bank already raised its benchmark rate by half a point in May and another three-quarters of a point last month, the biggest single hike since 1994.

Rapidly raising rates risks tipping the US economy into recession, but it’s also the Fed’s most powerful tool to get price increases back to their 2% annual target.

The Labor Department reported last week that its consumer price index soared 9.1% over the past year, the biggest annual increase since 1981. The labor producer price index, which measures inflation before reaches consumers, increased 11.3% in June compared to a year earlier. .

Higher loan rates have sidelined many home seekers and cooled what was once a red-hot housing market, one of the most important sectors of the economy. The National Association of Realtors said Wednesday that sales of previously occupied US homes slowed for the fifth straight month in June.

Home prices continued to rise in June, albeit at a slower pace than earlier this year, even as sales slowed. The national median home price rose 13.4% in June from a year earlier to $416,000. That’s an all-time high based on data going back to 1999, NAR said.

“Consumer concerns about rising rates, inflation and a potential recession are manifesting in weaker demand,” said Sam Khater, chief economist at Freddie Mac. “As a result of these factors, we expect appreciation in the house prices moderate notably”.

The Mortgage Bankers Association said Wednesday that mortgage applications are down 19% from last year and refinances are down 80% to a 22-year low.

Layoffs in the housing and loan sectors have already started. Among those reporting job cuts in recent months are online mortgage company LoanDepot, online real estate broker Redfin and Compass.

The nation’s largest bank by assets, JPMorgan Chase, is laying off hundreds of people from its mortgage unit and has reassigned hundreds to jobs in other parts of the company.

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