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The
average contract rate on a 30-year fixed-rate mortgage jumped by
23 basis points to 6.62% for the week ended Feb. 17 following
stronger-than-expected retail sales and labor market data as
well as still robust monthly inflation readings, which compelled
investors to up their bets that the U.S. central bank will have
to keep raising its policy rate through the summer.
That has caused a spike in U.S. Treasury yields, and a second
straight weekly increase in mortgage rates after several weeks
of declines. The yield on the 10-year note acts as a benchmark
for mortgage rates.
Mortgage rates soared to more than 7% last October as the
central bank raised its benchmark policy rate in 2022 at the
fastest pace in 40 years, but had began to ebb after signs late
last year that inflation was on the wane. The interest-rate
sensitive housing sector has borne the brunt of the Fed's
actions.
The renewed rise on mortgage rates caused more potential buyers
to sit on the sidelines. The MBA's Purchase Composite Index, a
measure of all mortgage loan applications for purchase of a
single family home, dropped 18.1% from the prior week to its
lowest level since 1995.
The MBA's Market Composite Index, a measure of overall mortgage
loan application volume, also declined 13.3% from a week
earlier.
Other housing data on Tuesday showed that U.S. existing home
sales dropped to the lowest level in more than 12 years in
January, but the pace of decline slowed, raising cautious
optimism that the housing market slump could be close to
reaching a bottom.
(Reporting by Lindsay Dunsmuir; Editing by Mark Potter)
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