Updated at 10:13AM EST
U.S. mortgage rates rose above 6% for the first time in fourteen years, an industry lobby said on Wednesday, with new home purchases waning and the Federal Reserve signaling more increases in the near term amid its ongoing fight against inflation.
The Mortgage Bankers Association said 30-year fixed rates matching loan balances below $647,200 rose 7 basis points to 6.01% for the week ended September 9, a move that takes that key rate to the highest level since the nation’s housing bubble burst in November. from 2008.
The seasonally adjusted purchasing index for the MBA, which tracks mortgage applications to purchase a single-family home, rose only 0.2% as buyers retreated from new transactions amid higher borrowing costs, while new orders fell 1.2%.
The MBA said its refinancing index fell 4.2% ahead of next week’s expected 75 basis point increase from the Federal Reserve, with bets on a 100 basis point hike now accelerating quickly.
“High mortgage rates have lowered refinancing activity by more than 80 percent from a year ago, and contributed to more homebuyers staying on the sidelines,” said Joel Kahn, associate vice president of economic and industry forecasting at the MBA.
“Government loans, favored by first-time buyers, bucked this trend and increased during the week, primarily driven by lending activity from the US Department of State and the US Department of Agriculture,” he added.
Mortgage rates are up about 4% so far this year, raising the 30-year average fixed cost to 5.47% last week.
This is central to housing affordability, particularly given the pressures on buyers as a result of the fastest consumer price inflation in forty years, and could flood the market with existing home sales as sellers look to ‘cash back’ in the final throes of long housing gains. term.
New supply shortages are adding to the pressure as well, with US housing starts hitting a one-and-a-half year low in July, thanks in part to higher mortgage rates and rising construction costs.
The downturn in July included a 9.6% drop in the seasonally adjusted annual rate, which was pegged at 1.446 million units, and a 10.1% drop in single-family housing starts, the largest component of the local housing market.