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Mortgage Rates Increase to 4-Year High After Fastest Gain Since 1994

interest rates rising

Mortgage rates rose to a four-year high this week, capping three months of the fastest gains since 1994, according to a Freddie Mac report on Thursday.

The average U.S. rate for a 30-year fixed home loan is 4.72%, rising from 4.67% last week, the mortgage financier said. The average rate for a 15-year fixed mortgage is 3.91%, the highest since 2019’s first week, the report said.

Surging mortgage rates are softening demand for real estate by boosting the costs of owning a home, said Sam Khater, Freddie Mac’s chief economist. Financing costs are rising as the Federal Reserve tries to slow inflation by tightening monetary policy.

“The increase in mortgage rates has softened purchase activity such that the monthly payment for those looking to buy a home has risen by at least 20% from a year ago,” Khater said in a statement.

A combination of steeper financing costs, home-price gains and record lows in the number of homes on the market is causing home sales to slump, according to the National Association of Realtors.

Sales of previously owned homes declined to a six-month low in February, NAR said in a March 18 report. Combined sales of single-family houses, townhomes, and condominiums dropped 7.2% from the prior month, NAR said.

The national supply of homes on the market increased to 870,000 in February, the second-lowest level ever recorded, from an all-time low of 850,000 a month earlier, according to NAR data.

"Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases," said Lawrence Yun, NAR's chief economist. "Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate.”

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