US mortgage rates climb for third straight week, reaching 6.5%

MORTGAGE rates in the US rose to the highest level since November, ramping up the pressure on potential homebuyers.

The average for a 30-year, fixed loan was 6.5 per cent, up from 6.32 per cent last week, Freddie Mac said in a statement on Thursday (Feb 23). That marks a third straight week of increases.

Higher borrowing costs are translating into weaker demand as the industry prepares for its key selling season. Mortgage applications recently dropped to the lowest level since 1995 and sales of previously owned US homes unexpectedly declined for a 12th straight month in January.

“The economy continues to show strength, and interest rates are repricing to account for the stronger than expected growth, tight labour market and the threat of sticky inflation,” said Sam Khater, Freddie Mac’s chief economist.

The Federal Reserve has been hiking its benchmark rate to tamp down on inflation. While the central bank moderated the size of its increases, minutes of its last meeting showed that officials were inclined to keep raising rates.

The increases have fuelled a surge in borrowing costs over the past year. Buyers with a US$600,000 mortgage would now pay US$3,792 a month on average, about US$965 more than the same time a year ago. BLOOMBERG