US mortgage rates climb to highest level in 13 years

U.S. mortgage rates rose to their highest level in 13 years this week.

U.S. housing finance giant Freddie Mac said on Thursday the average contract rate on a 30-year fixed-rate mortgage rose by more than half a percentage point to 5.78%. The rate is well above the 2.93% recorded just one year ago and marks the steepest level since November 2008.

The average rate on a 15-year mortgage – which is more popular among homeowners who choose to refinance – climbed to 4.81%, up from last week’s 4.38%. This number was just 2.24% one year ago.

“These higher (mortgage) rates are the result of a shift in expectations about inflation and the course of monetary policy,” said Sam Khater, Freddie Mac’s chief economist. “Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”

The Mortgage Bankers Association’s (MBA) Purchase Composite Index, which covers mortgage loan applications for single family homes, increased 8.1% from a week ago. The MBA’s Refinance Index rose 3.7%.

Purchase applications, however, were down more than 15% from last year as low housing stock and lack of affordability, alongside climbing rates, appeared to have impacted demand.