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Home-Loan Interest Rates Surge On Inflation Worries

Worries about soaring inflation, and a sharp rate increase by the Federal Reserve Board forced home-loan lenders to hike interest charges.

On June 15th, Fed policymakers raised its key interest rate by 0.75% of 1 percentage point—the largest bump since 1994. The Fed’s funds rate range now stands at 1.5% to 1.75%, and policymakers forecast a doubling of that range by the end of 2022.

The large rate hike came after recent data showed the U.S. inflation rate rose to a four-decade high of 8.6%—far above the Fed’s target rate of 2%.

“We thought strong action was warranted at this meeting, and we delivered that,” said Fed chairman Jerome Powell. Analyst said the Fed is struggling with a strong labor market and soaring gasoline and energy prices that have been aggravated by Russia’s invasion of the Ukraine.

As a result, Freddie Mac’s Primary Mortgage Market Survey reported on June 16th that benchmark 30-year fixed home-loan rates rose to an average of 5.78% from 5.23% a week earlier. A year ago, lenders were charging an average of 2.93% for 30-year fixed-rate mortgages.

Rates on 15-year fixed home loans averaged 4.81% on June 16th, up from 4.38% a week earlier. A year ago, lenders were charging an average of 2.24% for 15-year fixed-rate loans.

“Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987,” said Sam Khater, Freddie Mac’s chief economist.

“These higher rates are the result of a shift in expectations about inflation and the course of monetary policy,” Khater said. “Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced market.”

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a down payment of 20% and have excellent credit.

Loan deals still available

Chicago-area borrowers who wake up and get off the fence still have a chance to lock in the following bargain rates as of June 16th, reports

  • First Savings Bank of Hegewisch was quoting 4.6% on 30-year loans and 3.95% on 15-year mortgages with 20% down payment and a $615 loan fee.

  • Mutual of Omaha was quoting 4.933% on 30-year loans and 4.499% on 15-year mortgages with a 20% down payment and a $850 loan fee.

  • Liberty Bank was quoting 5.5% on a 30-year loan and 4.375% on a 15-year mortgage with 20% down and a loan fee of $646.


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