Mortgage rate soars to 7.22% after strong economic data

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Mortgage rate soars to 7.22% after strong economic data
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The average rate on the popular 30-year fixed mortgage hit 7.22%, according to Mortgage News Daily.

last week, following signals from Federal Reserve Chairman Jerome Powell that the central bank may continue raising interest rates following a pause in June.

In remarks to Congress just after the June Fed meeting, Powell said the central bank has "a long way to go" to bring inflation back to the 2% goal. The next interest rate decision is on July 26. The 30-year fixed mortgage rate has now risen 31 basis points in just the past week. For a homebuyer taking out a $400,000 mortgage, the monthly payment of principal and interest rose to $2,720 from $2,637 in just one week.

For sellers, higher mortgage rates have created a so-called "golden handcuff" effect. The vast majority of homeowners today have mortgages with interest rates below 4% or even below 3%, as rates hit record lows in the first year of the Covid pandemic.

Because of that, there is a currently a critical shortage of homes for sale, with year-to-date new listings now 20% behind last year's pace.

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