U.S. mortgage interest rates reach a 12 year high, demand falters

Applied Energetics

20/04/2022 12:00

April 20 (Reuters) - The average interest rate on the most
popular U.S. home loan climbed to a 12 year high last week and
fewer homebuyers sought properties in a sign that the Federal
Reserve's aim of cooling the housing market may be beginning to
have an impact, data from the Mortgage Bankers Association (MBA)
showed on Wednesday.
    The average contract rate on a 30-year fixed-rate mortgage
increased to 5.20% in the week ended April 15 from 5.13% a week
earlier, the MBA survey showed. It has risen 2 percentage points
from one year ago.
    The bulk of the run up, however, has occurred since the
start of the year, causing the fastest climb in home-financing
costs in decades as the Fed abandoned a cautious approach to
raising its benchmark overnight lending rate in favor of swifter
and more decisive action to bring down persistently high
inflation. 
    The central bank is also set to decide at its next meeting
on May 3-4 to begin reducing its portfolio of $8.5 trillion of
U.S. Treasuries and mortgage-backed securities, a stash of
assets that had helped keep consumer borrowing costs - for
mortgages in particular - low throughout the COVID-19 pandemic. 
    Those expectations for Fed tightening actions have led to a
surge in Treasury yields as financial markets reacted. The yield
on the 10-year note US10YT=RR, which acts as a benchmark for
mortgage rates, is at its highest level since 2018.
    The latest increase in home-financing costs also led to
fewer mortgage applications last week following a small bump in
demand the prior week as buyers rushed to lock in rates before
they moved higher. The MBA said its Purchase Composite Index, a
measure of all mortgage loan applications for purchase of a
single family home, fell 3.0% on a seasonally adjusted basis to
254.0, while the refinance index fell 8%.

 (Reporting by Lindsay Dunsmuir Editing by Mark Potter)
 ((Lindsay.Dunsmuir@thomsonreuters.com; +1 646 384 8221;))