Mortgage rates in America rose 7% this week, the highest level in 20 years, and the latest sign that the Fed’s hawkish moves are hurting the local housing market.
The average 30-year fixed-rate mortgage, the most popular home loan product, was 7.08%, according to data released Thursday by Freddie Mac.
The last time mortgage rates soared was in April 2002 and they are set to continue to rise as the Fed moves quickly to tame an overheated housing market, an important step in lowering rental costs and ultimately in the suppression of inflation in the economy in general.
The central bank does not determine mortgage costs directly, but changes in its benchmark rate – known as the federal funds rate – spread throughout the economy and affect all types of loans.
Since March, the Fed has raised interest rates five times, bringing the benchmark interest rate by nearly zero at a value between 3% and 3.25%. The central bank is expected to raise interest rates by another 0.75 percentage points next week.
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