According to data released on Wednesday (21 Sep) by the Mortgage Bankers Association (MBA), the average interest rate on the most common home loan in the United States increased to its highest possible level since October 2008.
Rise in borrowing cost
As the Federal Reserve continues to aggressively raise borrowing costs in an effort to control high inflation, rising mortgage interest rates are having an increasing negative impact on the rate of interest of housing industry.
Later on 21 Sep, the central bank is expected to increase interest rates by 0.75% for the third consecutive time.
Rates increased due to anticipation of Fed Regulation
Since the beginning of this year, Treasury rates have increased due to anticipation of Fed regulation. The benchmark for mortgage rates is the value on the 10-year note.
For the week ending September 16, the average contract rate for a 30-year term mortgage increased by 24 percent growth to 6.25%, a level that had not been reached since the Great Recession’s and financial crisis’s tail end.
Mortgage Bankers Association of America’s (MBA) report
The MBA also reported that its Market Composite Index – measurement of the amount of mortgage loan applications, improved by 3.8 percent from a week earlier but still lagged far behind levels from a year ago. Its Refinance Index increased 10.4% from the previous week but decreased 82.7% from a year ago.
With conforming loan balances ($647,200 or less), the aggregate contract rate of interest for 30-year fixed-rate mortgages jumped to 6.25% from 6.01%.
Even though they were remained 83% lower compared to the same week a year earlier, applications to modify a mortgage, which are frequently particularly susceptible to large rate changes, actually increased 10% for the week.
Mortgage applications to buy a home rose 1% for the week but were 30% less than they were in the same week last year.
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Reference – CBS News
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