US mortgage rates climb to highest level in 21 years

Rate for 30-year fixed mortgage reaches 7.09%

An 'open house' flag is displayed outside a single family home in Los Angeles, California. AFP

Mortgage rates in the US have climbed to their highest level in 21 years amid the Federal Reserve's aggressive interest rate increases.

The 30-year fixed-rate mortgage average 7.09 per cent, up from 6.96 per cent last week, mortgage buyer Freddie Mac reported. The rate stood at 5.13 per cent this time last year.

It is the highest level since April 2002 and the first time it has surpassed 7 per cent since last November.

Mortgage rates have climbed since the Fed embarked on its campaign to raise interest rates, which at 5.33 per cent now also surpass a two-decade high.

“The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s chief economist.

The 10-year Treasury yield recently hit at 15-year high of 4.258 per cent.

With high mortgage rates making buying a home more expensive, current homeowners who already have a low mortgage rate are more reluctant to sell their homes. With low inventory and rising mortgage rates, would-be homebuyers are being priced out of the market.

At $410,200, the median existing-home sales prices in June was the second highest ever recorded, according to a recent report from the National Association of Realtors.

“Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales,” sad Mr Khater.

The 15-year fixed-rate mortgage rate average 6.46 per cent, up from last week's 6.34 per cent.