Powell speaks after the Fed raised rates half a point: Live updates

credit…Andre Tambonan for The New York Times

Mortgage rates have risen nearly two percentage points since the start of the year — the fastest pace in nearly four decades — making them more expensive to pay. Prospective home buyers In an already overheated market.

Whether these rates rise further may depend, in large part, on the effectiveness of the Fed’s attempts to tame inflation quickly.

The Federal Reserve raised its benchmark interest rate by half a percentage point on Wednesday Inflation rate, driven largely by jumps in energy and food prices, has continued to grow. It was the largest rate increase by the Federal Reserve in more than 20 years.

Because the standard rate, known as the federal funds rate, directly and indirectly The cost of many loans, the increase is intended to increase borrowing costs, slow demand, and curb price increases.

Mortgage rates are not directly related to the federal funds rate. They tend to track the yield on 10-year Treasuries, which is influenced by a variety of factors, including inflation expectations.

“Inflation is the primary focus of the wheel,” said Greg McBride, chief financial analyst at Bankrate.com. The risk, he added, is that interest rates will continue to rise “unless and until we have some continuing evidence that inflation has peaked and is beginning to decline.”

Although still low by historical standards, the 30-year mortgage rate was at a flat rate of 5.10 percent for the week ending April 28, according to the Freddy Mac. This is the highest point in 12 years and up from 2.98 percent a year ago. The average was 3.11% at the end of 2021.

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High mortgage rates, combined with a rise in home prices — the average current home was about 15 percent more expensive in March than a year earlier — have eaten up what potential homebuyers can afford.

She also has double demand: Applications have fallen to their lowest levels since 2018, according to the Mortgage Bankers Association.

“Prospective homebuyers withdrew this spring as they continue to face limited choices of homes for sale combined with rising costs as a result of increased mortgage rates and prices,” said Joel Kahn, associate vice president of economic and industrial forecasting for the group. last week.

With a 10 percent down payment on the average home, the typical monthly mortgage payment is now $1,834 — up 49 percent from $1,235 last year, taking into account rising prices and rates. This does not include other non-negotiable things, such as property taxes, homeowner’s insurance, and mortgage insurance, which are often required on down payments of less than 20 percent.

These costs accumulate over time. at recent studyUsing data from its online marketplace, Jacob Channel, LendingTree’s chief economist, found that the price increase from the start of the year could cost homebuyers an additional $93,000, on average, over the life of the 30-year mortgage.

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