Oct 1 (Reuters) – The interest rate on the most common US home loan shot up by a quarter percentage point this week to the highest in almost three years on the back of surging government bond yields, dealing another setback to would-be home buyers.
The rate on a 30-year, fixed-rate mortgage now averages 7.28%, up from 7.03% a week ago, Freddie Mac data showed on Thursday. It was the largest weekly increase in about four years.
Mortgage rates are tied closely to the yield on US 10-year Treasury notes, which this week hit the highest in nearly a quarter century after data showed US economic growth was stronger in the first half of the year than previously estimated, momentum that is seen having continued through the third quarter. Furthermore, inflation remains elevated – more than 1 percentage point above the Federal Reserve’s 2% target – and investors expect the Fed to respond with at least one more interest rate hike this year to lower inflation.
The Freddie Mac data followed a similar reading of mortgage rates from the Mortgage Bankers Association, which on Wednesday also reported another drop in mortgage application volumes in the face of rising rates. The 30-year rate is up by more than 1.2 percentage points in the seven months since the US and Israel launched attacks against Iran, leading to a jump in global energy costs and feeding into a wider rise in inflation.
“Mortgage rates increased for the sixth straight week, reaching a nearly three-year high,” MBA President and CEO Bob Broeksmit said in a statement. “Affordability and borrower demand have weakened in recent weeks as the higher-rate environment continues to put pressure on both prospective homebuyers and homeowners looking to refinance.”
(Reporting By Dan Burns; Editing by Chizu Nomiyama )
