US Mortgage Rates Surpass 6% for the First Time Since Financial Crisis... Demand Plummets

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Amid ongoing interest rate hikes by the U.S. Federal Reserve (Fed) to curb inflation, U.S. mortgage rates have surpassed 6% for the first time since the 2008 global financial crisis.

According to the Mortgage Bankers Association (MBA) on the 14th (local time), last week the average 30-year fixed mortgage rate (for loans with balances of $647,200 or less) rose to 6.01%, up from 5.94% the previous week.

Mortgage rates, which had recently shown slight signs of slowing, have been rising again following hawkish remarks from Fed officials including Chairman Jerome Powell. Joel Kan, MBA's Director of Economic and Industry Forecasting, stated, "The 30-year fixed mortgage rate has reached 6% for the first time since 2008," adding, "It has doubled compared to a year ago."

Refinance demand fell an additional 4%, shrinking by 83% compared to a year ago.

Mortgage applications for home purchases increased by 0.2% compared to the previous week but decreased by 29% year-over-year. The slight increase in applications is interpreted as a result of growing demand for loan programs aimed at first-time homebuyers.

The MBA's Market Composite Index (MCI), which measures mortgage loan application volume, was recorded at 255, down 1.2% from the previous week.

With the Fed expected to continue its aggressive tightening, a sharp rise in mortgage rates and its impact on the housing market are inevitable for the time being. The Fed is widely expected to implement a third consecutive "giant step" (a 0.75 percentage point rate hike) at next week's Federal Open Market Committee (FOMC) meeting. Some market observers are even speculating a 1 percentage point increase.

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