Mortgage rates hit 5% for the first time in over a decade

Average mortgage rates hit a new high over the past week, with the 30-year Freddie Mac benchmark reaching 5% for the first time in over a decade.

The 30-year fixed rate mortgage average came in at 5% for the weekly period ending April 7, according to Freddie Mac’s Primary Mortgage Market Survey, up 28 basis points from 4.62% seven days earlier. As recently as mid March, the average stood below 4%. One year ago, the 30-year rate stood at 3.04%.

“Rates increased in response to the hawkish Federal Reserve, while economic data continues to show strong labor markets and inflation pressures,” said Paul Thomas, vice president of capital markets at Zillow, in a research blog post.

Inflation showed little signs of slowing, with the U.S. Bureau of Labor Statistics showing consumer prices had accelerated by 8.5% on a year-over-year basis in February, the fastest pace in 40 years. To combat inflationary pressure, the central bank gave even stronger signals about its intentions in its March meeting, contributing to upward rate pressure, Thomas said.

“The Federal Reserve’s plan for reducing its balance sheet — its holdings of U.S. Treasuries and mortgage-backed securities — was slightly more aggressive than some market participants expected,” he added.

As rates and prices continue to rise, first-time home buyers and the businesses who serve them now find themselves dealing with headwinds on multiple fronts.

“As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” said Sam Khater, chief economist at Freddie Mac.

While the 30-year rate hit 5%, the average of the 15-year mortgage also crossed a threshold, increasing to 4.17% from 3.91% a week earlier. In the same time frame one year ago, the 15-year average came in at 2.35%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage also increased again, rising 13 basis points week over week, coming at 3.69% compared to 3.56% the previous week.