Keystone Today

In its latest attempt to curb inflation and cool the broader economy, the Federal Reserve has raised 30-year mortgage rates to a 13-year high and at the fastest weekly pace in 35 years. 

This move has the potential to drive millions of buyers out of the housing market as well as spark an economic recession. In Pennsylvania mortgage rates hover around 6%.

As part of the Federal Reserve's "campaign to cool inflation," the Wall Street Journal (WSJ) reports the average rate on a 30-year fixed-rate mortgage rose to 5.78% last week, according to mortgage-finance giant Freddie Mac. The week prior Freddie Mac reported an average mortgage rate of 5.23%.

"The surge marks the largest weekly increase since 1987," Orla McCaffrey and Sam Goldfarb of WSJ reported. "It stands to add to the pressure on U.S. home prices, which remain strong despite rising rates and tumbling affordability."

The move comes as the consumer-price index (CPI) rose to 8.6% in May from the same month a year ago, another 40-year high growth rate, according to data from the U.S. Bureau of Labor Statistics. 

The impact from higher rates is unknown territory, but some investors are concerned the Fed could tip the U.S. into a recession, according to WSJ. On June 15 the central bank raised interest rates by 0.75 percentage point, the biggest increase since 1994.

WSJ reports that last month homeBuyers paid an average of $740 more a month to finance a median-priced U.S. home than they did in May 2021, when prices were lower and rates were closer to 3%, according to Realtor.com.

Analysts say the recent increase in mortgage rates seems unlikely to reverse anytime soon. Fed Chairman Jerome Powell said that he expects another increase of either 0.5 or 0.75 a percentage point at the Fed’s meeting in July, according to WSJ. Some lenders have reportedly quoted rates higher than 6% already.

Bankrate.com reports that as of Monday, the going rate for a 30-year fixed mortgage in Pennsylvania stands at 5.96%.

According to MarketWatch, Eric Finnigan, a director at John Burns Real Estate Consulting, mortgage rates rising from 3% at the start of this year to 6% effectively rules out 18 million households from qualifying for a $400,000 mortgage.