The cost of a typical U.S. mortgage has reached its highest level since the 2008 financial crisis as the country struggles to contain soaring home prices.
The average rate on a 30-year mortgage hit 6.02 percent this week, more than twice the rate of a year ago.
For families looking to buy a home, these moves exacerbate affordability issues.
The increase comes as the U.S. central bank aggressively raises interest rates to ease the pressures driving up inflation across the economy.
The U.S. Department of Labor said this week that U.S. consumer prices rose 8.3 percent in the year ending in August, the fastest increase in nearly 40 years.
The figure was higher than expected, raising expectations that the Federal Reserve will continue to raise interest rates sharply. Mortgage rates soared in an expected move.
Sam Hart, chief economist at Freddie Mac, the government-sponsored mortgage company that released the rate data, said, “Interest rates continued to rise this week, and the inflation data came in higher than expected, exceeding 6 percent for the first time since late 2008.” .
By raising borrowing costs, policymakers hope to reduce demand from businesses and households, thereby reducing the pressure to push prices higher.
In the real estate market, however, property prices continue to climb, although higher interest rates have slowed sales.
In July, the cost of a typical U.S. home exceeded $400,000 (£348,000), up more than 10 percent from a year ago.
“While interest rate hikes will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate,” Mr. Khater said.
End of low borrowing costs
The spike in mortgage rates is a clear shift in the U.S. real estate market, where borrowing costs have been relatively low since 2008, when the U.S. central bank cut interest rates sharply to help bolster the economy during the financial crisis.
When the epidemic hit in 2020, the Federal Reserve cut rates again, helping usher in a frenzied period of home buying in which home prices rose in record numbers.
That era ended in March, when banks began rapidly raising interest rates in response to signs that rapid price increases were becoming entrenched throughout the economy.
Many mortgage brokers and real estate agents have announced layoffs in response to the economic slowdown.