U.S. mortgage rates rose past 6% for the first time in fourteen years, an industry lobby group said Wednesday, as new home purchases slump and the Federal Reserve signals more near-term hikes amid its ongoing inflation fight.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $647,200 rose 7 basis point to 6.01% for the week ending on September 9, a move that takes that headline rate to the highest level since the nation's housing bubble burst in November of 2008.
The MBA's seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single-family home, rose just 0.2% as buyers backed away from new transactions amid the surge in borrowing costs, while new applications were down 1.2%.
The MBA said its refinancing index slumped 4.2% ahead of next week's expected 75 basis point increase from the Federal Reserve, with bets on a 100 basis point hike now accelerating quickly.
"Higher mortgage rates have pushed refinance activity down more than 80 percent from last year and have contributed to more homebuyers staying on the sidelines," said Joel Kan, the MBA’s associate vice president of economic and industry forecasting.
"Government loans, which tend to be favored by first-time buyers, bucked this trend and increased over the week, driven mainly by VA and USDA lending activity,” he added.
Mortgage rates have risen by around 4% so far this year, taking the average cost of a 30-year fixed to 5.47% last week
That's taken an axe to housing affordability, particularly given the pressures buyer's are facing as a result of the fastest consumer price inflation in forty years, and could glut the market with existing home sales as sellers look to 'cash out' in the final throes of housing long-term gains.
A lack of new supply is adding to the pressures, as well, with U.S. housing starts hitting a one-and-a-half year low in July, thanks in part to surging mortgage rates and elevated construction costs.
The July slump included a 9.6% decline in the seasonally-adjusted annual rate, which was pegged at 1.446 million units, and a 10.1% plunge in single-family home starts, the largest component of the domestic housing market.
