After falling to historic lows last year, mortgage rates are rising sharply. On April 30, they hit their highest point in more than a decade with the average US interest rate for a 30-year fixed-rate mortgage at 5.4%, according to Bankrate. By comparison, a year ago rates were under 3%.
Federal Reserve policymakers look set to deliver a series of aggressive interest rate hikes at least until the summer to deal with exceptional prices increases in the housing market, hot inflation and surging labor costs. Analysts say higher mortgage rates are just what’s needed to cool things down. These higher rates are expected to slow demand and temper home prices.
Sharply higher food and gas prices lifted overall inflation to a new 40-year high of 6.6% in March, data from the Commerce Department showed. At more than triple the Fed’s target, hot inflation is why the central bank is widely expected to ramp up the pace of rate hikes with a half-point increase at each of its next three meetings, and continue raising rates through the end of the year.