US mortgage interest rates reach 6.25%, highest level since October 2008

THE average interest rate on the most popular US home loan climbed to its highest level since October 2008, Mortgage Bankers Association (MBA) data showed on Wednesday (Sep 21).

Rising mortgage rates are increasingly weighing on the interest-rate-sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs in order to tame high inflation.

The central bank is set to raise interest rates by 3-quarters of a percentage point for a third straight time later on Wednesday.

Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year. The yield on the 10-year note acts as a benchmark for mortgage rates.

The average contract rate on a 30-year fixed-rate mortgage rose by 24 basis points to 6.25 per cent for the week ended Sep 16, a level not seen since towards the end of the financial crisis and the Great Recession.

The MBA also said its Market Composite Index, a measure of mortgage loan application volume, increased 3.8 per cent from a week earlier, but remained well below last year’s levels. Its Refinance Index jumped 10.4 per cent from the prior week but was down 82.7 per cent compared with 1 year ago. REUTERS