The average rate for a long-term mortgage in the US went down again this week. This is because the Federal Reserve is still likely to raise its benchmark borrowing rate as it tries to fight inflation.
Freddie Mac, which buys mortgages, said Thursday that the 30-year rate went down from 5.70 percent to 5.30 percent over the past week. The average rate for a 30-year loan was 2.90 percent a year ago.
On June 24, the 30-year rate went up to 5.81 percent. Since then, it has been going down.
The average rate for 15-year fixed-rate mortgages, which are popular with people who want to refinance their homes, dropped from 4.83 percent last week to 4.45 percent this week. The rate was 2.26 percent a year ago.
The Federal Reserve raised its benchmark rate by three-quarters of a point last month. This was the biggest increase in a single increase since 1994. Fed policymakers hinted in notes from a meeting that were released on Wednesday that interest rates might need to go up a lot to stop inflation that has been high for four decades.
They also admitted that raising rates could hurt the economy, but said that it was necessary to bring price growth back to the Fed’s 2 percent annual goal.
The Fed raised interest rates by an unusually large amount after government data showed that inflation hit a 40-year high of 8.6% in May. The Fed’s benchmark short-term rate, which affects many consumer and business loans, will now be set between 1.5% and 1.75 %. Fed policymakers expect this range to double by the end of the year.
Higher interest rates on loans have made people less likely to buy homes, which has slowed down the housing market, which is one of the most important parts of the economy. In May, sales of homes that had already been lived in slowed for the fourth month in a row.
Even though sales slowed in May, home prices kept going up. In May, the national median home price went up 14.8% from a year earlier to $407,600. This is the highest it has ever been, according to NAR data that goes back to 1999.
The Mortgage Bankers Association said this week that mortgage applications are down 17% from last year and refinancings are down 78%. Since more Fed rate hikes are almost certain, these numbers aren’t likely to change much.
In the housing and lending industries, people have already lost their jobs. Last month, online real estate broker Redfin said it was firing 8% of its employees, and Compass said it was firing 450 workers.
JPMorgan Chase, which has the most assets in the country, is letting go of hundreds of people from its mortgage unit and sending hundreds more to work in other parts of the bank.