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The average US long-term mortgage rate rose this week to its highest level since November, according to weekly data from mortgage buyer Freddie Mac.
The interest rate on the 30-year fixed-rate mortgage rose to 6.81% this week from 6.71% a week ago. A year ago it averaged 5.30%.
“Mortgage rates resumed their upward trend this week, reaching their highest level this year,” said Sam Khater, Freddie Mac’s chief economist.
Homes in the Harris Ranch community in Boise, Idaho, U.S. on Friday, July 1, 2022. Photographer: Jeremy Erickson/Bloomberg via Getty Images
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New housing on Market Street in South Burlington photographed on May 11, 2021
Meanwhile, the average interest rate on a 15-year fixed-rate mortgage rose to 6.24% this week. Last week the average was 6.06%. A year ago, at this point, the 15-year fixed-rate mortgage averaged 4.45%.
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“This uptrend is being driven by a robust economy, persistent inflation and a more hawkish tone from the Federal Reserve. These high interest rates combined with low inventories continue to drive many potential homebuyers out of the market,” Khater continued.
Mortgage rates do not necessarily reflect Fed rate hikes, but tend to follow the 10-year Treasury yield. Investor expectations of future inflation, global demand for US Treasuries, and how the Fed handles interest rates can affect home loan rates.
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Beginning with its first hike in March 2022, the Fed raised interest rates to about 5.1%, the highest level in 16 years, before slacking off at its policymakers’ meeting last month.
The average interest rate on a 30-year mortgage remains more than double what it was two years ago, when extremely low interest rates sparked a wave of home sales and refinancing. The now much higher interest rates are helping to keep the number of homes available low by deterring homeowners who secured the lower borrowing costs two years ago from selling.
The lack of real estate in the market is also a major reason home sales have been slow this year. Sales of previously occupied U.S. homes fell 20.4% year over year last month, according to the National Association of Realtors, marking ten consecutive months of annual declines of 20% or more.
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The Associated Press contributed to this report.