The average interest rate on the most popular U.S. home loan rose above 6% for the first time since 2008 and is now more than double the level it was a year ago, Mortgage Bankers Association (MBA) data showed Wednesday.
Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector as the Federal Reserve continues to aggressively lift borrowing costs in order to tame high inflation.
The central bank has raised its benchmark overnight lending rate by 225 basis points since March.
Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year. The yield on the 10-year note acts as a benchmark for mortgage rates.
The average contract rate on a 30-year fixed-rate mortgage rose by 7 basis points to 6.01% for the week ended Sept. 9, a level not seen since near the end of the 2008 financial crisis and recession that stretched into 2009.
The MBA also said its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is down 64% from a year ago. Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to a year ago.
A worse-than-expected key inflation reading Tuesday cemented expectations the Fed will be forced to deliver a third straight 75-basis point interest rate hike at its policy meeting next week, with investors now predicting the central bank will have to hike rates faster and further than previously thought.
The impact of higher interest rates is being felt across the housing sector. New home sales plunged to a 6½-year low in July while home resales and single-family housing starts are at two-year lows. But house prices remain elevated amid a critical shortage of affordable homes, making a housing market collapse unlikely.
