Mortgage Rates Spike to 20-Year High and Fed May Raise Rates Again Amid Crushing Inflation
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With Americans still facing prolonged financial pain from the record-high cost of living, the Federal Reserve's concern over inflation could signal more interest rate hikes to come.
Some economists believed the Fed's July uptick would be the last in this cycle. But newly released meeting minutes from last month show discussions suggesting unless economic conditions change, more rate hikes will be needed.
High inflation drove the Federal Reserve to raise its benchmark interest rate 11 times since March 2022, lifting the Fed funds rate to the current 5.4%, the highest level in 22 years.
Mortgage Rate Rises to Highest Level in 20 Years
Meanwhile, the average long-term U.S. mortgage rate climbed this week to its highest level in more than 20 years – grim news for would-be homebuyers already challenged by a housing market that remains competitive due to a dearth of homes for sale.
Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan rose to 7.09% from 6.96% last week. A year ago, the rate averaged 5.13%.
It's the fourth consecutive weekly increase for the average rate and the highest since early April 2002, when it averaged 7.13%. The last time the average rate was above 7% was last November when it stood at 7.08%.
"The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb," said Sam Khater, Freddie Mac's chief economist. "Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales."
The lack of housing supply is also a big reason home sales are down 23% through the first half of this year.
Job Market Shows Resiliency
One area of the economy that doesn't seem to be changing soon – the strong job market.
The Labor Department's numbers released Thursday show new unemployment applications down 11,000 last week to 239,000, down from 250,000 the previous week.
Jobless claim applications are seen as a proxy for the number of layoffs in a given week.
Overall, 1.72 million people were collecting unemployment benefits the week that ended August 5 – about 32,000 more than the previous week.
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