Average long-term US mortgage rate back above 7% this week

Nov 10, 2022, 8:00 AM | Updated: 8:27 am
FILE - A "SOLD" is posted outside a single family home in a residential neighborhood, in Glenside, ...

FILE - A "SOLD" is posted outside a single family home in a residential neighborhood, in Glenside, Pa., Wednesday, Aug. 4, 2021. Mortgage buyer Freddie Mac reports on key 30-year mortgage rates on Thursday, Nov. 10, 2022. (AP Photo/Matt Rourke, File)

(AP Photo/Matt Rourke, File)

WASHINGTON (AP) — The average long-term U.S. mortgage rate returned to the 20-year highs of two weeks ago when rates breached 7% for the first time since 2002.

Mortgage buyer Freddie Mac reported Thursday that the average on the key 30-year rate rose to 7.08% from 6.95% last week. A year ago the average rate was 2.98%.

The rate for a 15-year mortgage, popular with those refinancing their homes, climbed to 6.38% from 6.29% last week. It was 2.27% one year ago.

Last week, the Federal Reserve raised its short-term lending rate by another 0.75 percentage points, three times its usual margin, for a fourth time this year as part of its inflation-fighting strategy. Its key rate now stands in a range of 3.75% to 4%.

More increases are likely coming, though there is some hope that the Fed will dial them down as more evidence comes in that prices have peaked.

The Labor Department reported Thursday that consumer inflation reached 7.7% in October from a year earlier, the smallest year-over-year rise since January. Excluding volatile food and energy prices, “core” inflation rose 6.3% in the past 12 months. The numbers were all lower than economists had expected.

Thursday’s report raised the possibility that the Fed could decide to slow its rate hike, a prospect that sent stock prices jumping as soon as the data was released.

Two weeks ago, the average long-term U.S. mortgage rate topped 7% for the first time in more than two decades, which combined with sky-high home prices, have crushed homebuyers’ purchasing power by adding hundreds of dollars to monthly mortgage payments.

Sales of existing homes have declined for eight straight months as borrowing costs have become too big of an obstacle for many Americans already paying more for food, gas and other necessities. Additionally, many homeowners seeking to upgrade or change locations have held off listing their homes because they don’t want to jump into a higher rate on their next mortgage.

The sagging housing market has prompted real estate companies to dial back their financial outlooks and shrink their workforces. Online real estate broker Redfin on Wednesday said it was cutting 862 employees and shutting down its instant-cash-offer subsidiary RedfinNow.

Redfin also laid off 470 employees in June, blaming slowing home sales. Through attrition and layoffs, Redfin has slashed more than a quarter of its workforce on the assumption that the housing downturn will last “at least through 2023,” it said in a regulatory filing.

Another online real estate broker, Compass, has laid off hundreds of workers this year.

While mortgage rates don’t necessarily mirror the Fed’s rate increases, they tend to track the yield on the 10-year Treasury note. The yield is influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.

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Average long-term US mortgage rate back above 7% this week