WASHINGTON (AP) — Average long-term U.S. mortgage rates eased again this week as the Federal Reserve remains likely to raise its benchmark borrowing rate in its ongoing battle to bring down inflation.
Mortgage buyer Freddie Mac reported Thursday that the 30-year rate fell to 5.30% from 5.70% last week. One year ago the average 30-year rate was 2.90%.
The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, fell to 4.45% from 4.83% from 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 single hike since 1994. In notes from its meeting released Wednesday, Fed policymakers signaled that much higher interest rates could be needed to reign in four-decade high inflation.
They also acknowledged that their rate hikes could weaken the economy, but suggested that such steps were necessary to slow price increases back to the Fed’s 2% annual target.
The Fed’s unusually large rate hike came after government data showed U.S. inflation rose in May to a four-decade high of 8.6%. The Fed’s benchmark short-term rate, which affects many consumer and business loans, will now be pegged to a range of 1.5% to 1.75% – and Fed policymakers forecast a doubling of that range by year’s end.
Higher borrowing rates have discouraged house hunters and chilled the housing market, one of the most important sectors of the economy. Sales of previously occupied U.S. homes slowed for the fourth consecutive month in May.
Home prices kept climbing 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 going back to 1999.
Mortgage applications have declined 17% from last year and refinancings are down 78%, the Mortgage Bankers Association reported this week. Those numbers are unlikely to improve much with more Fed rate increases a near certainty.
Layoffs in the housing and lending sectors have already begun. Last month, the online real estate broker Redfin said it was laying off 8% of its workers and Compass said it was letting go of 450 employees.
The nation’s largest bank by assets, JPMorgan Chase, is laying off hundreds from its mortgage unit and has reassigned hundreds of others to jobs elsewhere in the firm.