On Wednesday, Bloomberg reported that according to an analysis by the Mortgage Banker’s Association, as the Federal Reserve’s policy of interest rate hikes pressured the mortgage industry, US mortgage rates rose to their highest levels in more than 20 years at the end of September.
The contract rate for the average 30-year fixed rate mortgage increased by 12 basis points over the reporting period according to the trade body, the biggest rise sine mid-August, as it reached 7.53% by Friday. It was the first time since November 2000 that the rate rose above 7.5%. One year ago at this time, the rate stood at 5.5%.
In practical terms, that would indicate that a $400,000 30-year mortgage would have cost $1,800 per month one year ago. However now it will cost almost $2,800, given the current rate.
At the same time, the analysis found that over the reporting period, home purchase application fell by 5.7% to the lowest level since 1995.
According to the Mortgage News Daily, mortgage rates have continued to rise over this week. On Tuesday, the 30-year fixed rate mortgage rate was 7.72% according to its tracker.
Since the Federal Reserve began its concerted campaign to hike interest rates last year in an effort to combat inflation, the US housing market has been suffering. More recently, a surge in bond yields has further impacted the market.
On Tuesday, after US labor turnover data for August was published, 10-year US Treasury bond yields, which impact mortgage rates as well as other forms of borrowing, rose to 4.8%, the highest it has been since 2007. The labor data showed there were more job openings than had been expected. Traders assumed that meant the labor market continues to be tight, which might precipitate the Federal Reserve to either maintain rates at a higher level, or even hike interest rates further.
For its part, the Federal Reserve continues to send mixed messages about further policy decisions, and whether there will be any more interest rate hikes this year. Regardless, most observers are operating on an assumption that interest rates will continue to be elevated through next year as inflationary pressures persist. There will be two additional Federal Reserve policy meetings before the end of the year.
