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U.S. mortgage interest rates rise to 4.9%

by Mike Robinson

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© Reuters. FILEPHOTO: Behind a sign indicating “sold”, a home is under construction in York County South Carolina. This was February 29th, 2020. REUTERS/Lucas Jackson/File Photo

(Reuters) – The Federal Reserve signaled on Wednesday that it would tighten monetary policies to reduce inflation.

According to the Mortgage Bankers Association, the average fixed rate mortgage contract rate for a 30-year term rose to 4.9% from 4.8% one week prior. This kept mortgage rates at their highest point since December 2018.

The fastest rise in mortgage rates since 1994 is now at 1.6 percent.

According to Zillow Home Value Index, home prices rose by around 35% after the COVID-19 pandemic. This was when the U.S. central banks helped to fuel the hot housing market with low interest rates.

The Fed increased its overnight benchmark lending rate for September last month. This was the first increase in three years. It also indicated that rates will rise faster than the financial markets expected. This has dragged down home buyer demand.

Investors expect the Fed to raise its federal funds rate from 0.25% to 0.5% this year and bring it up between 2.5% and 2.55%.

According to the MBA, its Market Composite Index (a measure of volume for mortgage loans) fell 6.3% seasonally to 398.5. This is the lowest point since March 2019.

MBA reported that also the refinance Index fell 9.9% to its lowest level since March 2019

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