Long-term mortgage rates tumble but remain barrier to homebuyers

WASHINGTON — The average long-term U.S. mortgage rate tumbled by nearly a half-point this week, but will likely remain a significant barrier for potential homebuyers as Federal Reserve officials have all but promised more rate hikes in the coming months.

Mortgage buyer Freddie Mac reported Thursday that the average on the key 30-year rate fell to 6.61% from 7.08% last week. A year ago the average rate was 3.1%.

The rate for a 15-year mortgage, popular with those refinancing their homes, fell to 5.98% from 6.38% last week. It was 2.39% one year ago.

Late last month, the average long-term U.S. mortgage rate breached 7% for the first time since 2002.

Two weeks ago, the Fed raised its short-term lending rate by another 0.75 percentage points, three times its usual margin, for a fourth time this year as part of its inflation-fighting strategy. Its key rate now stands in a range of 3.75% to 4%.

There had been some hope that the Fed would begin to dial the rate increases down as more evidence comes in that prices may have peaked. However, recent comments by Fed officials have turned knocked down that optimism.

James Bullard, who leads the Federal Reserve Bank of St. Louis, said Thursday that the Fed may have to raise its benchmark interest rate much higher than it has previously projected to get inflation under control.

The Fed’s next two-day rate policy meeting wraps up on Dec. 14.

The Labor Department reported last week that consumer inflation reached 7.7% in October from a year earlier, the smallest year-overyear rise since January.