The Federal Reserve's efforts to tame scorching inflation are pushing mortgage rates to 6%, as homebuyers feel squeezed in the current real estate market.
The average mortgage rate for a 30 year fixed mortgage is 5.81%, the highest level since November 2008 and up 3.02% from a year ago, according to Freddie Mac. The average 30 year fixed-rate mortgage hit 5.78% last week, the largest weekly increase since 1987.
The average rates for a 15 year fixed-rate mortgage and 5 year Treasury-indexed hybrid adjustable-rate mortgage are now 4.92% and 4.4%.
On Thursday, the Mortgage Bankers Association reported that the national median mortgage payment was $1,897 in May, up from $1,889 in April and $1,736 in March. Payments have increased by $513, or 37.1%, in the first five months of the year.
The new data comes as existing home sales fell to a seasonally adjusted annual rate of 5.41 million in May, down 3.4% from the previous month. Existing home sales fell by 8.6% on a year-over-year basis. The median existing home price for all housing types in May was $407,600, up 14.8% from May 2021, as prices in all regions increased.
Freddie Mac Chief Economist Sam Khater said that fixed mortgage rates have increased by more than two full percentage points since the beginning of the year. Recent declines in existing home sales are due to the combination of rising rates and high home prices. Many potential homebuyers are still interested in buying a home, keeping the market competitive, but leveling off the last two years of red-hot activity. The total housing inventory was 1.16 million units at the end of May, up 12.6% from April, but down 4.1% compared to the previous year. Unsold inventory is at a 2.6 month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.
The Federal Reserve was for the first time in nearly three decades last week. The key federal funds rate is the highest since thepandemic began two years ago, between 1.50% and 1.75%.
There was an aggressive rate increase for the rest of the year, according to officials. The Fed's two-day meeting showed that policymakers expect interest rates to hit 3.4% by the end of 2022, which would be the highest level since 2008.
After the recent meeting, Fed Chairman Jerome Powell told reporters that another increase of 75 basis points or 50 basis points is on the table for the Fed's July meeting.
Goldman Sachs, Bank of America and Deutsche Bank all raised the odds of an economic downturn in 2022 or 2023.