Washington (AFP) – Average long-term mortgage rates in the United States continued to rise this week. The interest rate on the standard 30-year loan breached 3.5%.
Home loan rates in recent weeks have been at levels not seen since early 2020, when the coronavirus pandemic was spreading in the United States. However, they remain at historically low levels.
Mortgage buyer Freddie Mac reported Thursday that the average interest rate on a 30-year loan rose to 3.56% from 3.45% last week. In contrast, it was 2.77% a year ago.
The average rate for 15-year fixed-rate mortgages, which is popular with those refinancing their homes, jumped to 2.79% from 2.62% last week.
Mortgage rates were expected to rise this year after the Federal Reserve announced last month that it would begin to roll back its monthly bond purchases – which are aimed at lowering long-term interest rates – to slow accelerating inflation. But even with the expected three or four rate increases in 2022, the Fed’s key interest rate will remain historically low at around 1%.
Last week, the government reported that inflation rose to 7% in December from a year earlier, the largest such increase in four decades. In addition, the Department of Labor reported that prices at the wholesale level rose by a record 9.7% last month from December 2020.
In addition to rising inflation, experts expect strong economic growth and a tight labor market to continue to push interest rates higher.
Economists at Freddie Mac expect higher mortgage rates to lead to a modest decline in purchasing demand ahead of the spring home buying season. They noted that the supply of homes for sale is still limited and prices are still high.
The housing supply was tight long before the pandemic, and prices have risen nearly 20% over the past year. High mortgage rates can make it difficult for homebuyers to secure a new home.
New data released Thursday showed that sales of previously occupied homes fell in December for the first time in four months as many potential buyers became frustrated by the shortage of available homes – which fell to their lowest level in more than two decades.
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