Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week, a direct result of the Federal Reserve’s aggressive rate hikes intended to tame inflation not seen in some 40 years.
Mortgage buyer Freddie Mac reported Thursday that the average on the key 30-year rate jumped to 7.08% from 6.94% last week. The last time the average rate was above 7% was April 2002, a time when the U.S. was still reeling from the Sept. 11 terrorist attacks, but six years away from the 2008 housing market collapse that triggered the Great Recession.
The Freddie Mac data mirrors that of the Mortgage Bankers Association (MBA), released Wednesday, that said the average contract rate on a 30-year fixed-rate mortgage rose by 22 basis points to 7.16% for the week ended Oct. 21 while the MBA’s Market Composite Index, a measure of mortgage loan application volume, fell 1.7% from a week earlier. Mortgage application activity is at its slowest pace since 1997.
Mortgage rates have more than doubled since the beginning of the year, as the Federal Reserve pursues an aggressive path of interest rate hikes to rein in stubbornly high inflation.
Last year at this time, rates on a 30-year mortgage averaged 3.14%, according to the Freddie Mac data.
The Fed has raised rates five times this year, including three consecutive 0.75 percentage point increases that have brought its key short-term borrowing rate to a range of 3% to 3.25%, the highest level since 2008. At their last meeting in late September, Fed officials projected that by early next year they would raise their key rate to roughly 4.5%.
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