(Reuters) – The average interest rate on the most popular U.S. home loan kept climbing last week to stay at more than a three year high, a survey showed on Wednesday, as the Federal Reserve signals it will aggressively tighten monetary policy to curb inflation.
The Mortgage Bankers Association (MBA) said the average contract rate on a 30-year fixed-rate mortgage rose to 4.9% in the week ended April 1 from 4.8% a week earlier, keeping mortgage rates at their highest level since December 2018.
Mortgage rates have now risen by nearly 1.6 percentage points since the start of the year, the fastest run-up in home borrowing costs since 1994.
Home prices have gained around 35% since the onset of the COVID-19 pandemic, when the U.S. central bank helped fuel the red hot housing market by slashing interest rates to near zero, according to the Zillow Home Value Index.
Last month, the Fed raised its benchmark overnight lending rate last month for the first time in more than three years and indicated rates would go up faster than financial markets had previously expected, dampening demand from home buyers.
Investors see the Fed bringing its federal funds rate to 2.5%-2.75% by the end of this year, up from the current target range of between 0.25% and 0.5%.
The MBA said its Market Composite Index, a measure of mortgage loan application volume, fell 6.3% on a seasonally adjusted basis to 398.5, the lowest level since March 2019.
The refinance index also dropped 9.9% to the lowest level since March 2019, MBA said.
(Reporting by Lindsay Dunsmuir; Editing by Simon Cameron-Moore)