US mortgage rates down sharply as economic jitters seep into housing

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U.S. mortgage rates fell at the fastest pace since 2008 last week as economic jitters in bond markets spill over to home lending at a time when housing costs are at historic highs.

The average interest rate charged on a 30-year fixed-rate mortgage fell for the second week in a row to 5.3%, from 5.7% the previous week, Freddie Mac, the mortgage lender, said on Thursday. supported by the government.

The partial drop reverses a rapid and steep rise in mortgage rates this year that followed the Federal Reserve’s aggressive campaign to fight inflation by raising benchmark interest rates. A year ago, mortgage rates averaged 2.9%.

Rising mortgage rates have added pressure on homebuyers as tight supply pushes up prices. The median U.S. home price in May topped $400,000 for the first time, a 14.8% increase from a year earlier, according to the National Association of Realtors.

“While the [mortgage rate] This decline provides minor relief to buyers, the housing market will continue to normalize if house price growth slows significantly due to the combination of low housing affordability and an expected economic slowdown,” said Sam Khater, chief economist at Freddie Mac.

Mortgage rates closely follow movements in Treasury yields. The yield on the 10-year Treasury note hit a high of nearly 3.5% in June, its highest level since 2011. It has since fallen about 0.5 percentage points and is now trading below 3%, reflecting fears that the Fed’s monetary tightening could lead to slower growth or a recession.

Mortgage applications fell 5.4% last week from the previous week, according to the Mortgage Bankers Association.

“Buying activity is hampered by affordability issues and low inventory, and homeowners have an ever-decreasing incentive to seek refinancing,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.

According to Black Knight, a real estate data company, annual home price growth slowed in May. The slowdown was the biggest since 2006, near the peak of the US subprime housing bubble.

“While any discussion of home values ​​and 2006 may set off some alarm bells, the truth is that price gains would need to see a deceleration at this rate for over 12 months just to bring us back to a 3- 5 per cent annual growth rate,” said Ben Graboske, president of data and analytics at Black Knight.

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