Average interest rate on home loan in US increases to highest level
Business
Federal Reserve’s expected requirement for tightening policy to control inflation trembles markets
(Reuters) - The average interest rate on the most common home loan in the United States increased last week to its highest level since November as bond markets trembled at the prospect that the Federal Reserve might need to keep tightening policy through the summer in order to control inflation, according to data released by the Mortgage Bankers Association (MBA) on Wednesday.
For the week ending February 17, the average contract rate for a 30-year fixed-rate mortgage increased by 23 basis points to 6.62% as a result of stronger-than-anticipated retail sales and labour market data as well as ongoingly strong monthly inflation readings. These factors led investors to increase their bets that the U.S. central bank will need to keep raising its policy rate through the summer.
As a result, U.S. Treasury yields have spiked and mortgage rates have increased for the second straight week following several weeks of reductions. The benchmark for mortgage rates is the yield on the 10-year note.
Mortgage rates increased to more than 7% in October of last year as the central bank boosted its benchmark policy rate at the quickest rate in 40 years. But, they had started to decline amid indicators that inflation was slowing down in the latter part of last year. The Fed's activities have mostly affected the housing market, which is interest rate sensitive.
Additional housing statistics released on Tuesday revealed that existing house sales in the United States fell in January to their lowest level in more than 12 years, although the rate of decline decreased, fostering cautious hope that the housing market collapse may be nearing its end.
