Mortgage rates surge over the week

USA 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.

USA borrowers filed the fewest applications to buy a home and to refinance one in almost four years last week as some 30-year mortgage rates increased to their highest levels in about 8-1/2 years, the Mortgage Bankers Association said on Wednesday. The drop correlates with rise in the contract rate on a 30-year fixed loan from 5.11 percent to 5.15 percent last week. Ten years ago, a housing collapse contributed to a deep recession.

In New York City, where luxury condo apartments are in a protracted sales slump, the rising interest rates and declining mortgage applications threaten to spread the pain to all levels of co-op and condo apartment sales.

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.

Added Khater, "Higher mortgage rates have led to a slowdown in national home price growth, but the price deceleration has been primarily concentrated in affluent coastal markets such as California and the state of Washington".

Home borrowing costs rose last week in step with higher bond yields due to upbeat payrolls data last month which showed wages recording their largest annual gain in 9-1/2 years.

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Sales of existing homes haven't fared any better, falling for six straight months.

The survey also showed that 15-year FRM this week averaged 4.33 percent, while the reading was 3.24 percent a year ago.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders.

The average doesn't include extra fees, known as points, that most borrowers must pay to get the lowest rates. The fee on 15-year mortgages ticked up by one-tenth to 0.5 point.

The average rate for five-year adjustable-rate mortgages rose to 4.14 per cent from 4.04 per cent last week. The fee remained at 0.3 points.

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