Average long-term U.S. mortgage rates fell further this week as the Federal Reserve is likely to raise its benchmark borrowing rate in its ongoing fight to reduce inflation.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate fell to 5.30% from 5.70% last week. A year ago, the 30-year average rate was 2.90%.

The 30-year rate jumped to 5.81% on June 24 and has been falling ever since.

The average rate on 15-year fixed-rate mortgages, popular among those refinancing their homes, fell to 4.45% from 4.83% last week. A year ago, the rate was 2.26%.

The Federal Reserve raised its benchmark rate last month by three-quarters of a point, the biggest hike since 1994. In notes from its meeting released on Wednesday, Fed policymakers signaled that much higher interest rates might be needed to reign in four decades. inflation.

They also acknowledged that their rate hikes could weaken the economy, but suggested such moves were needed to slow price increases toward the Fed’s 2% annual target.

Sales of previously occupied US homes slowed for the fourth consecutive month in May.

The unusually large Fed rate hike came after government data showed inflation rose in May to a four-decade high of 8.6%. The Fed’s short-term benchmark rate, which affects many consumer and business loans, will now be pegged to a range of 1.5% to 1.75% – and Fed policymakers predict a doubling of this range by the end of the year.

Rising borrowing rates discouraged house hunters and cooled the housing market, one of the most important sectors of the economy. Sales of previously occupied homes slowed for the fourth consecutive month in May.

Home prices continued to climb in May, even as sales slowed. The national median home price jumped 14.8% in May from a year earlier to $407,600 — an all-time high according to NAR data dating back to 1999.

Mortgage applications are down 17% from a year ago and refinances are down 78%, the Mortgage Bankers Association reported this week. These numbers are unlikely to improve much with more Fed rate hikes, a virtual certainty.

Layoffs in the housing and credit sectors have already begun. Last month, online property broker Redfin said it was laying off 8% of its employees and Compass said it was laying off 450 employees.

The nation’s largest bank by assets, JPMorgan Chase, is laying off hundreds of its mortgage unit and reassigning hundreds more to jobs elsewhere in the business.


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