Mortgage rates reached another 16-year high last week as the once red-hot housing market continues to cool, according to data released Wednesday from the Mortgage Bankers Association.
The 30-year fixed mortgage rate jumped to 6.81 percent in the first week of October, marking the eighth consecutive weekly increase and the highest rate since 2008.
Mortgage rates rose across all types in MBA’s Weekly Mortgage Applications Survey, with the highest increase seen in 5-year adjustable-rate mortgages (ARM), according to Mike Fratantoni, MBA’s senior vice president and chief economist. The share of ARM loan applications was 11.7 percent.
Overall, mortgage applications continued their decline, falling by 2 percent from a week earlier.
“Application volumes for both refinancing and home purchases declined and continue to fall further behind last year’s record levels,” Fratantoni said in a statement.
Mortgage rates have more than doubled over the past year as the Federal Reserve raises interest rates to target growing inflation. The Fed’s interest rate hikes have slowed the market after a 2-year boom, but declining prices are still up from last year.
Meanwhile, the U.S. labor market added 263,000 jobs last month, including 19,000 in construction, and the unemployment rate fell to 3.5 percent. Wage growth cooled in September with average hourly earnings rising by 0.3 percent.
“The news that job growth and wage growth continued in September is positive for the housing market, as higher incomes support housing demand,” Fratantoni added. “However, it also pushed off the possibility of any near-term pivot from the Federal Reserve on its plans for additional rate hikes.”
Fed Chair Jerome Powell expects rates to rise further to “go through a correction” before homes become affordable once again.
“For the longer term, what we need is supply and demand to get better aligned, so that housing prices go up at a reasonable level, at a reasonable pace, and people can afford houses again,” Powell said in September.