By Ann Saphir
Sept 23 (Reuters) – The rate on the most popular US home loan rose last week to its highest in more than two years, after the Federal Reserve lifted short-term interest rates to combat inflation, and rising oil prices drove up Treasury yields that underpin residential borrowing costs.
The average 30-year fixed-rate mortgage jumped 15 basis points to 7.12% in the week ended September 18, the Mortgage Bankers Association said on Wednesday. It was last higher in May 2024.
Mortgage rates have risen more than a full percentage point since joint US-Israeli strikes against Iran began pushing up the global price of oil in late February, putting the squeeze on prospective homebuyers and a chill into the US housing market.
Mortgage rates track US Treasury yields, which are sensitive to oil prices and the threat they pose to inflation, which has been running above the Fed’s 2% goal for 5-1/2 years.
Last week the Fed increased its policy rate by a quarter of a percentage point to the 3.75%-4.00% range to put inflation on a “timelier” path to 2%, and nearly all Fed policymakers projected at least one more rate increase by the end of this year. Traders are also betting on further Fed rate hikes.
The rise in mortgage rates last week led to a decline in refinancing and home purchase applications, the MBA said, and drove more borrowers into adjustable-rate mortgages, which offer lower upfront borrowing costs than fixed-rate mortgages and reset after a number of years to whatever the going rate is at the time. ARMs accounted for 9.8% of mortgage applications last week, the MBA said.
(Reporting by Ann Saphir; Editing by Chris Reese)
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