Mortgage rates rose above 5% for the first time in more than a decade. The 30-year fixed-rate mortgage, the most popular home loan product, hit the threshold just five weeks after breaking the 4% barrier, according to Freddie Mac. The average has not been this high since February 2011.
Now, with a loan of $400,000, for example, a 3.125% fixed-rate 30-year loan would cost $1,714 per month. This month, the same loan at 5.125% will cost $2,178 per month.
The increase comes as the Federal Reserve has launched a major plan to fight the highest inflation in 40 years. Fed officials expect that higher interest rates will control both inflation and the job market.
After the increase, the Mortgage Bankers Association is forecasting a slow market. “The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year,” the association’s chief economist Mike Fratantoni said in a statement. “Higher home prices and rates as well as ongoing supply constraints are now expected to lead to an annual decline in existing home sales.”
Just last January, the 30-year fixed average was at 3.22 percent. Now, at 5% the rate rose more quickly than many economists predicted.