Mortgage rates rise for first time in seven weeks

The average long-term US mortgage rate rose this week after falling for six straight weeks, adding to the challenges potential homebuyers face amid higher home prices and a limited supply of available houses.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate increased to 6.42% from 6.27% last week. That is more than double the year-ago average rate of 3.11%.

The long-term rate reached 7.08% in late October and again in early November as the Federal Reserve has continued to crank up its key lending rate this year in an effort to cool the economy and tame inflation.

The big increase in mortgage rates has torpedoed the housing market, with sales of existing homes falling for 10 straight months to the lowest level in more than a decade.

While home prices are now dropping as demand has declined, they are still nearly 11% higher than a year ago. Higher prices and a doubling of mortgage rates have made homebuying much less affordable and a much more daunting prospect for many people.

George Ratiu, senior economist at realtor.com, calculates that the monthly payment for a median-priced home is now about $2,100, before taxes and insurance, up more than 60% from a year ago. The median is halfway between the highest and lowest figures.

Sales of new homes are also falling. Ratiu expects mortgage rates will remain above 6% next year and sales to stay low.

“All of these data are indicative of a market going through a major reset, which is the Fed’s goal,” he said.

The Fed has hiked its benchmark interest rate seven times this year to a range of 4.25% to 4.5%, the highest in about 15 years. It has signaled it may raise them another three-quarters of a point next year.