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    Mortgage Rates Surge to Highest Level Since November, Impacting Home Sales

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    Mortgage rates in the US surged to their highest level since November this week, as the Federal Reserve’s efforts to combat inflation and a tighter labor market have pushed borrowing costs higher.[0] The 30-year fixed rate mortgage jumped 23 basis points to 6.62%, while the 20-year fixed rate mortgage rose to 6.5% and the 10-year fixed rate mortgage increased to 6.0%.[1]

    The increase in mortgage rates has put many homebuyers back on the sidelines, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.[2] A gauge of US home-purchase applications tumbled last week to the lowest level since 1995, as the highest mortgage rates in three months hammered a housing market struggling to stabilize.[3]

    The Federal Reserve has been hiking its benchmark rate to tamp down on inflation, and has already lifted the benchmark federal funds rate eight consecutive times.[4] The Fed’s decision to raise the federal funds rate by 0.25% on February 1 after its latest meeting suggests that inflation may be cooling and the central bank may be able to ease up on its rate hikes.[5]

    The yield on 10-year US Treasury bonds is closely associated with mortgage rates, which are determined by a mixture of expectations concerning the Fed's decisions, the Fed's actual actions, and the responses of investors. Treasury yields and mortgage rates have a reciprocal relationship; when yields increase, so do mortgage rates and when yields decrease, mortgage rates typically follow suit.[6]

    The 10-year Treasury yield, which typically influences the direction and size of mortgage rate movements, was 3.922% as of Wednesday, representing a month-to-date gain of 0.395 percentage point, according to Dow Jones Market Data.

    Mortgage rates can be unpredictable, as they can change without being affected by other economic indicators.[7] Home sales declined for the 12th month in a row, and January data shows existing-home sales across the US have retreated for the 12th straight month, though at a slower pace.[8]

    Rate dispersion increases as mortgage rates trend up, meaning that home buyers can potentially save $600 to $1,200 annually by taking the time to shop among lenders to find a better rate.[9] Using a mortgage calculator can also help buyers to estimate their monthly mortgage payment based on their interest rate, purchase price, down payment and other expenses.[10]

    0. “Mortgage apps plunge as rate jump puts buyers “on the sidelines”” Axios, 22 Feb. 2023, https://www.axios.com/2023/02/22/mortgage-applications-plummet

    1. “Savings window opens: Today's 20-year mortgage rates edge down | Feb. 23, 2023” Fox Business, 23 Feb. 2023, https://www.foxbusiness.com/personal-finance/todays-mortgage-rates-february-23-2023

    2. “Mortgage rates surge closer to 7%” Yahoo News, 23 Feb. 2023, https://news.yahoo.com/mortgage-rates-surge-closer-to-7-170055036.html

    3. “US Home-Purchase Applications Drop to 28-Year Low as Rates Jump” Yahoo! Voices, 22 Feb. 2023, https://www.yahoo.com/now/us-home-purchase-applications-drop-121758446.html

    4. “Home purchase applications plunge to 28-year low as mortgage rates jump” Fox Business, 22 Feb. 2023, https://www.foxbusiness.com/economy/home-purchase-applications-plunge-low-mortgage-rates-jump

    5. “Mortgage Rates for Feb. 23, 2023: Rates Move Higher” CNET, 23 Feb. 2023, https://www.cnet.com/personal-finance/mortgages/mortgage-rates-for-feb-23-2023-rates-move-higher

    6. “Today's Mortgage Rates & Trends – February 23, 2023: Rates mixed” Investopedia, 23 Feb. 2023, https://www.investopedia.com/today-s-mortgage-rates-and-trends-february-23-2023-rates-mixed-7113066

    7. “Inflation Seems to Have Peaked. Can the Same Be Said for Mortgage Rates?” The Motley Fool, 22 Feb. 2023, https://www.fool.com/the-ascent/mortgages/articles/inflation-seems-to-have-peaked-can-the-same-be-said-for-mortgage-rates/

    8. “Freddie Mac – Mortgage Rates Rise Again; Hit Highest Level of 2023” Realtor.com News, 23 Feb. 2023, https://www.realtor.com/research/freddie-mac-mortgage-rates-feb-23-2023/

    9. “Mortgage rates rise for third week in a row, returning to highs seen in November” MarketWatch, 23 Feb. 2023, https://www.marketwatch.com/story/mortgage-rates-rise-for-third-week-in-a-row-returning-to-highs-seen-in-november-83ee4440

    10. “Today's Mortgage Rates: February 20, 2023—Rates Jump Up Again” Forbes, 20 Feb. 2023, https://www.forbes.com/advisor/mortgages/mortgage-rates-02-20-23/

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