WASHINGTON — The average long-term U.S. mortgage rate fell nearly half a point this week, but will likely remain a significant headwind for potential buyers as Federal Reserve officials all but promise further increases rate in the coming months.
Mortgage buyer Freddie Mac reported on Thursday that the 30-year average key rate fell to 6.61% from 7.08% last week. A year ago, the average rate was 3.1%.
The rate for a 15-year mortgage, popular with those refinancing their homes, fell to 5.98% from 6.38% last week. It was 2.39% a year ago.
At the end of last month, the average long-term US mortgage rate crossed the 7% mark for the first time since 2002.
Two weeks ago, the Fed raised its short-term lending rate by an additional 0.75 percentage points, three times its usual margin, for the fourth time this year as part of its strategy to combat the inflation. Its key rate is now in a range of 3.75% to 4%.
There had been some hope that the Fed would begin to taper rate increases as more evidence came in that prices might have peaked. However, recent comments from Fed officials have dampened that optimism.
James Bullard, who heads the Federal Reserve Bank of St. Louis, said Thursday that the Fed may need to raise its benchmark interest rate much higher than it had previously expected to get inflation under control.
The next two-day Fed rate policy meeting will end on December 14.
The Labor Department reported last week that consumer inflation hit 7.7% in October from a year earlier, the lowest year-over-year rise since January. Excluding volatile food and energy prices, “core” inflation has increased by 6.3% over the past 12 months. On Wednesday, Labor announced that wholesale prices fell for the fourth consecutive month.
Those numbers were all lower than economists had expected, but it remains to be seen whether that will be enough to prompt the Fed to ease the oversized rate hikes.
Three weeks ago, the average long-term mortgage rate in the United States exceeded 7% for the first time in more than two decades, which, combined with skyrocketing house prices, crushed the purchasing power of buyers. adding hundreds of dollars to monthly mortgage payments.
Sales of previously owned homes have declined for eight straight months as borrowing costs have become too much of a barrier for many Americans who are already paying more for food, gas and other necessities. On top of that, homeowners looking to upgrade or change location have been delaying listing their homes because they don’t want to jump into a higher rate on their next mortgage.
The slump in the housing market prompted real estate companies to revise their financial outlook and reduce their workforce. Online property broker Redfin is laying off 862 staff and closing its instant cash offering subsidiary RedfinNow.
Redfin also cut 470 jobs in June, blaming slowing home sales. Through attrition and layoffs, Redfin has eliminated more than a quarter of its workforce on the assumption that the housing downturn will last “at least until 2023”, it said in a regulatory filing.
Another online real estate broker, Compass, cut hundreds of jobs this year.
Although mortgage rates don’t necessarily reflect Fed rate increases, they tend to track the yield of the 10-year Treasury. Performance is influenced by a variety of factors, including investors’ expectations for future inflation and global demand for US Treasuries.
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