(RoyalPatriot.com )- As concerns continue to mount that the Federal Reserve will continue to raise interest rates to combat inflation, the 30-year fixed mortgage rate rose by 23 points to 6.62% last week, which represented the highest interest rate since November, according to Newsmax.
Speculation surrounding the Federal Reserve raising rates through the summer comes as both retail sales and labor market data have been better than expected. After weeks of treasury yields and mortgage rates on the downswing, they’re reacting with a spike. The two are correspondent as the yield is the “benchmark” for mortgage rates.
Mortgage rates spiked in October 2022 to 7% at what was reportedly the “fastest pace” in 40 years, but with inflation showing that it was simmering down, rates responded in turn. That trend has changed as potential buyers are still sitting on the bench waiting out the volatility. In turn, home sales have also dropped to their lowest levels in 12 years. As the trend reportedly slows down, investors might appear more optimistic about the future.
The Mortgage Bankers Association’s (MBA) Purchase Composite Index fell by 18.1% to its lowest level since 1995. The Market Composite Index fell by 13.3%.
In November 2022, mortgages were down 55% and lenders were going bankrupt, according to MoneyWise. The real estate market may reportedly be facing a crisis similar to that experienced in 2008 as rising interest rates coupled with a low inventory of resale homes are luring buyers away.
While interest rates rise and affect mortgage rates, Americans are finding it harder to afford homes, including paying the rent, which is outpacing inflation, according to the Bureau of Labor Statistics. The average cost of rent has increased by 18% in the past five years, marking a 2% difference from the rising cost of goods and services (16%). From 2017 to 2022, rents exceeded inflation in every region, except the Northeast.