Mortgage

U.S. Mortgage Interest Rates Surge by Most in Almost 2 Years | Investing News

(Reuters) – The interest rate on the most prevalent type of mortgage in the United States rose last week by the most in two years and almost returned to what it was before the outbreak of the Corona virus pandemic, after signs that the Federal Reserve would raise interest rates. Sooner and faster than previously expected.

The Mortgage Bankers Association said Wednesday that its weekly measure of the average contract price on a 30-year fixed-rate mortgage jumped to 3.52% in the week ending Jan. 7 from 3.33% in the previous week. It was the largest weekly increase since March 2020 and pushed the prevailing rate back to where it was before the pandemic triggered a recession and pushed borrowing costs to historic lows when the Federal Reserve cut its benchmark interest rate to near zero.

Now it seems that that era is over. Mortgage rates have been on the rise for the past several months, but the big jump in rates last week followed the release of the minutes of the Federal Reserve’s December meeting. This reading showed that policy makers were prepared to combat high inflation with higher interest rates and a possible decrease in the Federal Reserve’s holdings of more than $8 trillion in Treasuries and mortgage-backed securities.

This is driving down mortgage application volumes, especially for loan refinancing, with rates now about half a percentage point higher than they were three months ago.

“Prices at these levels are quickly closing the door to refinancing opportunities for many borrowers. Although refinancing activity changed little during the week, orders remained at their lowest level in more than a month, and conventional refinancing requests were at their lowest level since January 2020. , said Joel Kahn, associate vice president of economic and industry forecasting at the MBA.

Total loan application volume rose 1.4% last week on the back of a 2.2% increase in loans to purchase a home, while refinancing applications fell 0.1%.

(Reporting by Dan Burns; Editing by Chizu Nomiyama)

Copyright 2022 Thomson Reuters.

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