The average 30-year mortgage rate climbed to 5.89%, the highest level since 2008, according to new data published Thursday by Freddie Mac.
Mortgage rates briefly declined for a period this summer even as the Federal Reserve raised the key interest rate to fight inflation. Markets have been closely watching the Fed's moves since the interest rate hikes began in March.
"Rates are reacting to Federal Reserve Chair Jay Powell’s comments following last week’s jobs report in which he reiterated his unwavering focus on bringing inflation down to its 2% target level," Lisa Sturtevant, the chief economist at Bright MLS, a real estate data firm, said in an email.
In remarks Thursday morning, Powell signaled the Fed intends to keep rates higher for longer.
“History cautions strongly against prematurely loosening policy,” he said in a Q&A presented by the Cato Institute, a libertarian think tank based in Washington, D.C, according to CNBC. “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”
Mortgage rates tend to track U.S. government bond yields. This week, the yield on the 10-year Treasury note jumped as high as 3.35%, itself the highest level in more than a decade.
The higher mortgage rates are already weighing on home prices. For the first time in nearly 18 months, the average U.S. home sold below its asking price, according to housing group Redfin. The median home sale price was $370,000, up by 6% year over year but 6% below the record high of $393,725 during the four weeks that ended June 19, Redfin said.
Even as mortgage rates tick higher, home shoppers should be able to easily find rates lower than the average, Freddie Mac said.
"Borrowers can meaningfully benefit from shopping around for a better rate," it said. "Our research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional rate quote and an average of about $3,000 if they get five quotes."