US Mortgage Rates Hit 13-Year High... Soar 0.55%P in Just One Week

by Cho Seulkina

Published 17 Jun.2022 04:53(KST)

[Asia Economy New York=Special Correspondent Joselgina] Mortgage rates in the United States have surged to their highest level in 13 years.

The Wall Street Journal (WSJ) reported on the 16th (local time), citing mortgage lender Freddie Mac, that the fixed rate on a 30-year mortgage in the U.S. reached 5.78%. This is the highest level since November 2008.

Compared to the average mortgage rate recorded last week (5.23%), it jumped 0.55 percentage points in just one week. WSJ described this as "the largest weekly increase since 1987."

Mortgage rates tend to move in line with the U.S. 10-year Treasury yield. The 10-year Treasury yield recently surpassed the 3% mark again amid the Federal Reserve's tightening measures, reaching its highest level since 2011.

The Fed began a rate hike cycle in March to curb soaring inflation. Following a big step increase (0.5 percentage points) in May, it took a giant step (0.75 percentage points) yesterday for the first time in 28 years. The Fed has also hinted at the possibility of another big step or giant step next month. Additionally, the Fed’s quantitative tightening (QT) starting this month, which involves reducing purchases of mortgage-backed securities (MBS), is interpreted as another factor pushing mortgage rates higher.

WSJ reported that Americans who purchased a median-priced home in May this year have to pay $740 (about 960,000 KRW) more per month in mortgage costs compared to May last year, when the average mortgage rate was around 3%.

This sharp rise in mortgage rates inevitably has a negative impact on the U.S. housing market. Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA), said, "Housing demand has dropped quite sharply," adding, "The Fed is having a significant impact on the real estate market."