The average interest rate on the most popular U.S. home loan climbed to its highest level since August 2008, data from the Mortgage Bankers Association (MBA) showed on Wednesday.
Rising mortgage rates are increasingly weighing on the interest-rate-sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs to curb high inflation.
The average contract rate on a 30-year fixed-rate mortgage rose by 27 basis points to 6.52% for the week ended Sept. 23, a level not seen since the financial crisis and the Great Recession.
Fed policymakers raised the central bank’s benchmark overnight interest rate by three-quarters of a percentage point last week, the third straight hike of that size, and acknowledged “pain” ahead for the economy as they seek to cool demand.
Fed Chair Jerome Powell also explicitly called out the housing market and said it would probably go through a “correction” after a period of “red hot” price increases.
Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year. The yield on the 10-year note acts as a benchmark for mortgage rates. The cost of home loans has risen by more than a percentage point over the past six weeks.
The MBA also said its Market Composite Index, a measure of mortgage loan application volume, fell 3.7 percent from a week earlier. Its Refinance Index dropped 10.9% from the prior week and is now at a 22-year low.