US mortgage interest rates top 5%, buyers look to lock in rates
[WASHINGTON] The average interest rate on the most popular US home loan rose to more than 5 per cent last week, the highest level since November 2018, and homebuyers hurried to make purchases before costs rise further, the latest weekly survey from the Mortgage Bankers Association (MBA) showed on Wednesday (Apr 13).
The average contract rate on a 30-year fixed-rate mortgage increased to 5.13 per cent in the week ended April 8 from 4.90 per cent a week earlier. It is up more than 1.5 percentage points since the start of the year as the Federal Reserve has begun to tighten financial conditions to cool demand in the economy amid high inflation.
Fed policymakers now anticipate a serious of swift interest rate hikes until the end of this year at least as they seek to bring down inflation, after they raised the benchmark overnight lending rate last month for the first time in 3 years.
Investors see the Fed bringing its federal funds rate to 2.5 per cent-2.75 per cent by the end of 2022, up from the current target range of between 0.25 per cent and 0.5 per cent.
The run up in borrowing costs, which has dampened demand for mortgage applications overall since the start of the year, caused a small bump in activity last week as homebuyers rushed to lock in rates before they move even higher.
The MBA said its Purchase Composite Index, a measure of all mortgage loan applications for purchase of a single family home, increased 1.4 per cent on a seasonally adjusted basis to 261.8, while the refinance index fell 4.9 per cent.
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The MBA's latest economic forecast was also released on Wednesday, with mortgage originations seen declining 35.5. per cent in 2022 from a year earlier to US$2.58 trillion.
Purchase originations are still seen rising, however, and are expected to increase 4 per cent from last year to a record US$1.72 trillion in 2022. REUTERS
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