By Jonnelle Marte
(Reuters) -U.S. mortgage rates increased to a two-year high last week and could keep rising, a trend which may further squeeze first-time buyers struggling to overcome higher home prices and limited housing supply.
Rates for a 30-year fixed-rate mortgage averaged 3.69% for the week ending Feb. 10, up from 3.55% the previous week, according to a report https://freddiemac.gcs-web.com/news-releases/news-release-details/mortgage-rates-jump-5 released on Thursday by Freddie Mac (OTC:FMCC). Mortgage rates are now the highest they've been since January 2020, shortly before the start of the pandemic.
"The normalization of the economy continues as mortgage rates jumped to the highest level since the emergence of the pandemic," Sam Khater, chief economist for Freddie Mac, said in a statement.
Mortgage rates are likely to continue rising in the coming months as the Federal Reserve raises interest rates to combat higher inflation. Investors increasingly expect the Fed to raise rates by half a percentage point next month after data released Thursday showed that annual inflation increased in January by the most in 40 years https://www.reuters.com/business/us-consumer-prices-rise-strongly-january-weekly-jobless-claims-fall-2022-02-10.
The higher borrowing costs could weigh on would-be home buyers feeling pessimistic about the housing market. The share of people who say it is a good time to buy a home fell to 25% in January, a survey record-low, according to a survey https://www.fanniemae.com/research-and-insights/surveys/national-housing-survey released on Monday by Fannie Mae.
Home prices continued to rise in the fourth quarter of 2021, but at a slower pace. The median price of a single-family home increased by 14.6% from the previous year, compared with an increase of 15.9% in the third quarter, according to a report released Thursday by the National Association of Realtors.
"The escalating prices took a toll on home shoppers," Lawrence Yun, chief economist for the NAR, said in a statement. "A number of families, especially would-be first-time buyers, are increasingly being forced out of the market."