Mortgage rates jump again, buyers head to the sideline

WASHINGTON (AP) — Average long-term U.S. mortgage rates jumped back up ahead of next week's Federal Reserve meeting where it's expected to announce another increase to its main borrowing rate.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate jumped to 5.23% this week from 5.09% last week. A year ago at this time, the average rate was 2.96%. Until April, the average rate hadn't exceeded 5% in more than a decade.

The brisk jump in rates, along with a sharp increase in home prices, has been pushing potential homebuyers out of the market.

Mortgage applications decreased 6.5% from one week earlier, the Mortgage Bankers Association reported Wednesday. The group's composite index, a measurement of mortgage loan application volume, is at its lowest level in 22 years. Its refinance index is 75% lower than a year ago.

Last month, the Federal Reserve intensified its fight against the worst inflation in 40 years by raising its benchmark interest rate by a half-percentage point and signaling more big rate hikes to come. The Fed’s move, its most aggressive since 2000, means higher costs for mortgages as well as credit cards, auto loans and other borrowing for individuals and businesses.

Higher borrowing rates appear to be slowing the housing market, an important part of the economy. In April, sales of both existing homes and new homes showed signs of faltering, worsened by sharply higher home prices and a shrunken supply of available properties.

However, some economists expect that the tapering of demand could benefit the more determined home shoppers.

"The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in...