Mortgage rates surged by more than half a percentage point this week amid rising inflation and an interest rate hike by the Federal Reserve, according to Freddie Mac. The jump is the largest one-week increase since 1987.
The 30-year fixed-rate mortgage averaged 5.78% in the week ending June 16, up from 5.23% the week before. Rates have risen more than two-and-a-half percentage points this year. They were at an average of 2.93% this time last year.
"These higher rates are the result of a shift in expectations about inflation and the course of monetary policy," said Sam Khater, Freddie Mac's chief economist.
"Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market."
Buyers are finding homes even less affordable as inflation takes a larger chunk of their income and the cost of borrowing has reduced their purchasing power.
A year ago a buyer who put 20% down on a median priced $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 2.93% had a monthly mortgage payment of $1,304, according to numbers from Freddie Mac.
Today, a homeowner buying the same priced house with an average rate of 5.78% would pay $1,827 a month in principal and interest. That's $523 more each month,
Mortgage rates tend to track 10-year US Treasury bonds. But mortgage rates are indirectly impacted by the Fed's actions on inflation.