The average contract rate on a 30-year fixed-rate mortgage increased to 5.20% in the week ended April 15 from 5.13% a week earlier, the MBA survey showed. It has risen 2 percentage points from one year ago.
The bulk of the run up, however, has occurred since the start of the year, causing the fastest climb in home-financing costs in decades as the Fed abandoned a cautious approach to raising its benchmark overnight lending rate in favor of swifter and more decisive action to bring down persistently high inflation.
The central bank is also set to decide at its next meeting on May 3-4 to begin reducing its portfolio of $8.5 trillion of U.S. Treasuries and mortgage-backed securities, a stash of assets that had helped keep consumer borrowing costs – for mortgages in particular – low throughout the COVID-19 pandemic.
Those expectations for Fed tightening actions have led to a surge in Treasury yields as financial markets reacted. The yield on the 10-year note US10YT=RR, which acts as a benchmark for mortgage rates, is at its highest level since 2018.
The latest increase in home-financing costs also led to fewer mortgage applications last week following a small bump in demand the prior week as buyers rushed to lock in rates before they moved higher. The MBA said its Purchase Composite Index, a measure of all mortgage loan applications for purchase of a single family home, fell 3.0% on a seasonally adjusted basis to 254.0, while the refinance index fell 8%.
Source: Economy - investing.com
