27-Jun-22 – Worries about soaring inflation – and a sharp rate increase by the Federal Reserve Board – forced home loan lenders to hike interest charges.

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

The large rate hike came after recent data showed the United States inflation rate rose to a four-decade high of 8.6 percent, far above the Fed’s target rate of 2 percent.

“We thought strong action was warranted at this meeting, and we delivered that,” said Fed chairman Jerome Powell (left). Analysts 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 Ukraine.

As a result, Freddie Mac’s Primary Mortgage Market Survey reported on June 16 that benchmark 30-year fixed home loan rates rose to an average of 5.78 percent from 5.23 percent a week earlier. By June 23, the average was 5.81 percent. A year ago, lenders were charging an average of 2.93 percent for 30-year fixed-rate mortgages.

Rates on 15-year fixed home loans averaged 4.81 percent on June 16, up from 4.38 percent a week earlier, and 4.92 percent on June 23. A year ago, lenders were charging an average of 2.24 percent 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 (right), Freddie Mac’s chief economist.

“These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. 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,” Khater said.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a down payment of 20 percent 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 16, reports RateSeeker.com.

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

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

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