Mortgage rates reach 5% in the US 1:04
(CNN) --
Mortgage interest rates rose this week, continuing an upward trend that has seen them rise more than two percentage points this year.
The 30-year fixed-rate mortgage averaged 5.27% in the week ending May 5, up from 5.10% the previous week, according to Freddie Mac. This is the highest level since 2009 and well above the 2.96% average this time last year.
"Mortgage interest rates resumed their climb this week, as the 30-year fixed rate reached its highest point since 2009," said Sam Khater, chief economist at Freddie Mac. "Although housing affordability and inflationary pressures pose a challenge to potential buyers, house price growth will continue but is expected to slow in the coming months.
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Hoping to curb inflation, the Federal Reserve announced earlier this week that it would raise the federal funds rate by half a percentage point, the biggest increase since 2000.
Following the meeting, Fed Chairman Jerome Powell said more hikes are expected, including more increases of 50 basis points.
But Powell said the central bank is not considering any hike higher than that.
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"A 75 basis point increase is not something that the committee is actively considering," Powell told reporters.
"If inflation goes down, we're not going to stop. We're just going to go down in 25 basis point increments."
Mortgage interest rates tend to follow trends for 10-year US Treasury bonds.
But rates are indirectly affected by the Fed's actions on inflation.
When investors see or anticipate rate hikes, they often sell government bonds, pushing up yields and, with them, mortgage interest.
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Since the beginning of this year, mortgage rates have risen more than two percentage points, the fastest pace in decades.
"The financial conditions facing homebuyers have changed a lot," Danielle Hale, chief economist at Realtor.com, said after the Fed's announcement.
Hale said the cost of financing a home with a 20% down payment has risen nearly 50% from last year, "an increase that has caused many buyers to rethink their budgets and has probably put some households out of business." of the home buying market for now.
At the same time, he said, demand to buy a home remains strong.
"Housing prices have continued to rise due to high rents and a strong sense of urgency to find a home and secure a home in large numbers of young households seeking the security and relatively fixed costs of home ownership." interest rate before mortgage rates and home prices go back up," he said.
Looking ahead to the rest of the year, there is uncertainty in the housing market, said Lawrence Yun, chief economist at the National Association of Realtors, at the organization's legislative meeting this week.
"Mortgages now, compared to a few months ago, cost homebuyers more money," Yun said.
"For a median priced home, the price difference is $300 to $400 more a month, which is a huge blow to a working family."
Yun estimates that inflation will remain high in the coming months and that the market will see further tightening of monetary policy through a series of interest rate hikes.
But, he said, as interest rates rise house prices are expected to decline.
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