A year ago, mortgage rates were below 3%. On Thursday, Freddie Mac data showed the average rate for a 30-year fixed mortgage was up to 5.89%, the highest point since 2008, NBC News reports. Rates briefly dropped this summer as the Federal Reserve raised the key interest rate in an effort to slow inflation. The housing market already was cooling off, per the Wall Street Journal. It's a sector the Fed can exert great influence over because the market responds to changes in interest rates. "We're all focused on the housing sector," Fed Vice Chairwoman Lael Brainard said at a conference Wednesday.
The mortgage industry boomed during the pandemic, as many companies refinanced borrowers seeking loans at lower rates. Companies often were able to expand, but that's over now that rates are rising again, with some having to lay off employees or shut down, per the Journal. Chairman Jay Powell indicated Thursday that the Fed wants to keep rates higher for a while. The climb in mortgage rates is a reaction to Powell's comments last week, said Lisa Sturtevant, chief economist for a real estate data firm, "in which he reiterated his unwavering focus on bringing inflation down to its 2% target level." (Read more mortgage rates stories.)