Long-term US housing loan rates continued their climb as the 30-year key mortgage rates hit 5%. This is the first time in more than a decade that this metric exceeded 5%. Housing officials attribute the rise to the US economy’s persistently high inflation.
Key Mortgage Rates Hits 5%
Mortgage buyer Freddie Mac reported Thursday that the key mortgage rates for 30 year loans hit 5%. This is up by 0.28% compared to last week.
Lately, the rise in key mortgage rates showed the fastest rise in increases since 1994. Last year. The 30-year key mortgage rate was at a low of 3.04%.
In addition, the average rate for 15-year fixed-rate mortgages rose from 3.91% to 4.17% last week. This is indicative of inflation continuing to rear its ugly head.
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Current US inflation rates are now at a 40-year high. The March numbers showed that the Consumer Price Index went up by 8.5%.
This means that the prices of common goods and services are now 8.5% higher compared to their prices 12 months ago. Apart from high inflation, homes remain in short supply due to the rise prices of building materials.
Most Expensive Time To Purchase A Home
As a result, Freddie Mac notes that this generation is now experiencing the most expensive rates for homeownership.
Unfortunately, the spring homebuying season just started recently. Presently, home prices are now 15% higher compared to last year’s rates. In fact, some areas reported an increase of 30% in the price of new homes.
The problems don’t stop there, however. A recent government report said that rising prices in energy led to a record 11.2% increase from last year.
This is yet another sign that inflation continues to spiral out of control in the US. Compared to March 2021, energy prices are now 36.7% higher.
Economists blame the spike on Russia’s invasion of Ukraine, which led to a perceived supply crunch in oil. This, along with the rise in consumer prices, is fueling inflation rates to numbers never seen since the early 1980s.
Banks Already Reporting Lower First Quarter Profits
Apart from homebuyers, banks are also disclosing a decline in their profits.
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Four big banks were among the firms that reported noticeable drops in earnings. Citigroup, Goldman Sachs, Morgan Stanley, and Wells Fargo joined JPMorgan Chase in announcing a double-digit decline in profits.
Goldman Sachs said that profits fell by 43% to $3.63 billion. Citigroup posted a higher 47% decline in the profits to end at $4 billion.
Wells Fargo’s profits dropped by 21% while Morgan Stanley’s lost 11%. Apart from the Ukraine conflict, banks pointed to the slowdown in the housing market as the culprit.
Watch the CNBC Television News reporting how the 10-year Treasury note is impacting mortgage rates:
Will the rise in key mortgage rates cool down the in-demand housing market? Will the slowdown in demand lead to lower prices eventually?
Tell us what you think of the sudden rise in mortgage interest rates. Share your thoughts in the comments section below.