U.S. mortgage rates jumped this week to the highest level in seven years, a trend that's pulling down home sales and slowing home price growth.
Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year, fixed-rate mortgage rose to 4.94 percent, from 4.83 percent last week. A year ago, the rate was 3.9 percent.
The average rate on a 15-year, fixed-rate loan increased to 4.33 percent, from 4.23 percent last week.
The rising mortgage rates are following the Federal Reserve's ongoing monetary policy tightening. The Fed announced today that it's holding its benchmark federal funds rate in a range of 2 percent to 2.25 percent. The rate-setting Federal Open Market Committee said it expects to continue gradually raising rates as the economy expands.
The Fed in September raised the fed funds rate for the third time this year, citing the strong labor market and healthy spending by consumers and businesses. It was the eighth hike since policymakers started to normalize monetary policy in late 2015.
Higher rates have kept many would-be home purchasers on the sidelines. Sales of existing homes have fallen for six straight months, and sales of newly built homes have declined for four months.
Freddie Mac says home price increases are slowing as a result, particularly in higher-priced coastal cities.
Mortgage rates have risen along with the yield on the 10-year note, which has also jumped in the past year on expectations of additional short-term rate increases by the Fed, faster economic growth and potentially higher inflation.
The yield on the 10-year reached 3.23 percent Thursday, up nearly a full percentage point from 2.33 percent a year ago.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.
The average doesn't include extra fees, known as points, that most borrowers must pay to get the lowest rates.
The average fee on 30-year fixed-rate mortgages was unchanged from last week at 0.5 points. The fee on 15-year mortgages ticked up by one-tenth to 0.5 points.
The average rate for five-year adjustable-rate mortgages rose to 4.14 percent from 4 last week. The fee remained at 0.3 points.