The interest rate for the most sought-after home loan in the United States climbed last week to a peak not seen in eight months, reaching 7.09%.
This increase continues a trend that is putting additional pressure on potential homebuyers who are already dealing with growing property prices and a constrained housing supply.
According to the Mortgage Bankers Association, the average contract rate for a 30-year fixed-rate mortgage increased by 10 basis points during the week ending January 10.
This marks the fifth consecutive week of rising rates, placing the primary home loan rate nearly one full percentage point higher than it was in September. In September, the Federal Reserve initiated cuts to short-term borrowing costs.
Right now, the Fed’s policy rate stands a full percentage point lower than it was at that time. However, mortgage rates have moved in the opposite direction influenced by a spike in treasury yields amid concerns regarding persistent inflation and increasing budget deficits.
President-elect Donald Trump is preparing to take office next week and he brings with him an economic strategy that includes the extensions of his 2017 tax cuts. These tax cuts are projected to contribute trillions to the national debt.
Last year, the U.S. budget deficit soared to over $1.8 trillion marking the highest level recorded outside of the COVID-19 pandemic. The Federal Reserve has indicated a more cautious approach to interest rate reductions this year, which was driven by worries about the stagnation in progress toward its 2% inflation target.
Along with the inflation target, worries are also about the uncertainties surrounding the potential economic effects of policies of Trump such as heightened tariffs and immigration restrictions. A new inflation report is expected soon, with economists predicting that the Labor Department will reveal a 2.9% increase in the consumer price index for December.
Business Journalist
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