Mortgage rates reach their highest level in 10 WEEKS – typical homebuyer must now pay $700 a MONTH more than if they bought two years ago

Homebuyers are facing yet more misery after US mortgage rates rose to their highest level in more than two months.

The average rate on a 30-year fixed home loan reached 6.77 percent, up from 6.64 percent last week, according to figures from Government-backed lender Freddie Mac.

It means somebody purchasing a $400,000 home with a five percent deposit faces paying an extra $700 per month than if they had bought two years ago.

Mortgage rates echo moves in the 10-year Treasury yield which have been rocked by a stronger-than-expected inflation report that casts doubt on when the Federal Reserve will be able to cut interest rates. 

The Fed’s benchmark funds rate is currently at a 22-year high of between 5.25 and 5.5 percent. 

The average rate on a 30-year fixed home loan reached 6.77 percent, up from 6.64 percent last week, according to figures from Government-backed lender Freddie Mac

It means somebody purchasing a $400,000 home with a five percent deposit faces paying an extra $700 per month than if they had bought two years ago

In theory, higher rates are supposed to reign in consumer spending and reign dampen inflation but prices have remained persistently high.

Investors had hoped for a rate cut during the Fed’s next meeting in March but now only 8.5 percent think this is likely, according to the CME FedWatch tool. 

Mortgage rates are influenced by a combination of future inflation expectations, global demand for US Treasurys and the Fed’s interest rate decisions. 

Freddie Mac chief economist Sam Khater said: ‘The economy has been performing well so far this year and rates may stay higher for longer, potentially slowing the spring homebuying season.’  

Despite the recent uptick, mortgage rates remain below their two-decade peak of 7.79 percent in October 2023.

But rates remain stubbornly high compared to where they were two years ago.

Freddie Mac said so far this year mortgage applications were down in more than half of all US states compared to the same period in 2023

A homebuyer purchasing a $400,000 home at today’s rate would have to pay $2,470 per month on a 30-year loan. This analysis assumes a 5 percent deposit.

But had they bought in February 2022 – when rates were hovering at 3.69 percent – they would pay just $1,747. 

Rising rates have subsequently poured cold water on housing demand. 

Freddie Mac said so far this year mortgage applications were down in more than half of all US states compared to the same period in 2023. 

A separate report by Redfin recently found home sales posted their biggest decline in four months.

In January, sales of existing homes dropped 8 percent compared to last year.