Mortgage rates rise to their highest level in over a decade as the Fed raises interest rates to control inflation.
"The 30-year fixed-rate mortgage averaged 5.11% in the week ending April 21, up from 5% the week before, according to Freddie Mac. It is the seventh consecutive week of increases and is significantly higher than the 2.97% average this time last year," according to CNN Business.
Excerpt from CNN Business: Buyers have been scrambling to get a home before rates rise too much. Those who weren't able to lock in a lower rate are finding themselves unable to afford the much higher payment on today's homes, said George Ratiu, Realtor.com's manager of economic research. That is starting to show in the sales numbers, with March's existing home sales down 2.7% from February -- even as prices hit an all-time record. "With the cost of financing a home about 40% higher than a year ago, demand for homes is visibly cooling, as many first-time buyers find themselves unable to qualify for a mortgage on a home that meets their needs," Ratiu said.
The Wall Street Journal's Nicole Friedmanreports that, "U.S. housing sales are heating up again this spring, but the highest mortgage rates in more than a decade threaten to cool the sales pace that has gripped the market for nearly two years."
Excerpt from The Wall Street Journal: While record-high home prices and record-low inventory of homes for sale have pushed many would-be buyers to the sidelines, intense demand has kept activity at historically strong levels. Now, with borrowing rates hitting 5% for the first time since 2011, homes may be getting too expensive to keep prices rising so rapidly. “We’ve never seen a time where mortgage rates have risen as quickly as they have and the market hasn’t cooled off,” said Ralph McLaughlin, chief economist at Kukun, a real-estate data firm. "It’s going to go from a gangbuster market to one that hopefully looks more normal.”
The rapidly-rising mortgage rates are largely a result of the Federal Reserve's recent actions to slow inflation by increasing lending rates.
"Rising interest rates tend to slow the economy — and tame inflation — by making it more costly for businesses to borrow to buy new equipment and hire more employees. They also make it more expensive to buy a house, pay for goods and services on credit, or take out a car loan," writes Larry Edelman for The Boston Globe.
Excerpt from The Boston Globe: As the Fed telegraphed its next steps, rates began going up across the board. On March 16, the Fed made its quarter-point move. That day, [Fed chairman Jerome] Powell also left no doubt that it would require multiple rate increases this year and next to get inflation under control. That’s when the run-up in mortgage rates shifted into high gear.