The average 30-year mortgage rate in the United States soared to 5.89 percent, the highest level since 2008, according to new data published by Freddie Mac on Thursday, September 8.
Mortgage rates briefly decreased this summer even as the Fed raised the key interest rate to fight the rising inflation. Markets have been closely watching the Federal Reserve's moves since the interest rate hikes started back in March.
Lisa Sturtevant, the chief economist at real estate data firm Bright MLS, said in an email that rates are reacting to comments made by Federal Reserve Chair Jay Powell following the jobs report last week, in which he reiterated his resolute focus on bringing inflation down to its 2 percent target level.
Federal Reserve intends to keep rates higher
Powell signaled in his remarks on Thursday morning that the Fed intends to keep rates higher for longer. In a Q&A presented by the Cato Institute, he said that history cautions strongly against prematurely loosening policy.
According to NBC News, Cato Institute is a libertarian think tank based in Washington, D.C. Powell added that he could assure that they are strongly committed to this project and will keep at it until the job is done.
Mortgage rates tend to track the bond yields of the U.S. government. The yield on the 10-year Treasury note jumped as high as 3.35 percent this week, the highest level seen in over a decade.
The higher mortgage rates are already affecting home prices in the U.S. According to housing group Redfin, the average U.S. home sold below its asking price for the first time in nearly 18 months.
Redfin said that the median home sale price was at $370,000, up by 6 percent year over year but 6 percent below the record high of $393,725 set during the four weeks that ended June 19.
Bank of America launches new mortgage products for Latino and Black communities
Freddie Mac said that even as mortgage rates tick higher, home shoppers should be able to find rates that are lower than the average easily. Freddie Mac noted that borrowers could benefit from shopping around for a better rate. Their research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional rate quote. They could also save an average of about $3,000 if they get five quotes.
To help narrow the homeownership gap among Hispanic-Latino and Black communities, Bank of America has decided to launch new zero down payment, zero closing cost mortgage products. This initiative will help people in minority communities buy their first homes, according to CNBC.
Bank of America's program is called the Community Affordable Loan Solution. It will be made available to specific markets, including majority Hispanic/Latino and/or Black neighborhoods in Dallas, Texas; Detroit, Michigan; Los Angeles, California; Miami, Florida; and Charlotte, North Carolina.
