Mortgage rates make biggest leap in 35 years

WASHINGTON — Average long-term U.S. mortgage rates had their biggest one-week jump in 35 years with the Federal Reserve this week raising its key rate by three-quarters of a point in bid to tame high inflation.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate climbed from 5.23% last week to 5.78% this week, the highest its been since November 2008 during the housing crisis.

Wednesday’s rate hike by the Fed was its biggest in a single action since 1994.

The brisk jump in rates, along with a sharp increase in home prices, has been pushing potential homebuyers out of the market. Mortgage applications are down more than 15% from last year and refinancings are down more than 70%, according to the Mortgage Bankers Association.

Those figures are likely to worsen with more Fed rate increases a near certainty.

The Fed’s unusually large rate hike came after data released last week showed U.S. inflation rose last month to a four-decade high of 8.6 %.

Higher borrowing rates appear to be slowing the housing market. Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates surged, driving up borrowing costs for would-be buyers as home prices soared.

Homeownership has become increasingly difficult lately, especially for first-time buyers. Besides staggering inflation, rising mortgage rates and soaring home prices, the supply of homes for sale continues to be scarce.

The average rate on 15-year fixed-rate mortgages, popular among those refinancing their homes, rose to 4.81% from 4.38% last week. A year ago, the rate was 2.24%.