The national average mortgage rate increased from last week, Freddie...

The national average mortgage rate increased from last week, Freddie Mac reported Thursday. Credit: Johnny Milano/Johnny Milano

U.S. mortgage rates rose this week as new data underscored the strength of the economy and suggested the Federal Reserve might have to take further action to control inflation.

The average rate for a 30-year fixed home loan increased to 6.32%, according to mortgage giant Freddie Mac. Last week, the average was 6.12%. It had peaked in late October and again in early November at 7.08%.

Long Island homebuyers are facing much higher costs to buy a home than at this point in 2022, when the average 30-year fixed loan came with a 3.92% interest rate. Higher rates drove the number of home sales in January to its lowest point in several years. But a lack of homes for sale has kept prices this year close to 2022 levels.

New economic data this week moved rates higher. A report on U.S. retail spending in January exceeded economists’ expectations and data showed inflation remained persistent despite the Fed’s efforts. Consumer prices in the 25-county region that includes Long Island increased 6% in January compared with the previous year.

“The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

These indicators of economic growth, including an earlier report that the U.S. economy added 517,000 jobs in January, could lead the Fed to consider additional increases to its benchmark rate. While the Fed doesn’t set mortgage rates, investor expectations about what it will do next influence lenders. Long-term mortgage rates tend to move in the same direction as the yield on 10-year Treasury notes, which has climbed this week.

“The combination of a record-high number of jobs and inflation rising above expectations drove up mortgage rates this week,” Nadia Evangelou, a senior economist at the National Association of Realtors, wrote of the new data on mortgage rates.

Evangelou predicted the inflation rate could ease later this year because slower growth in rents last year has not yet been fully factored into inflation data and housing costs represent about 40% of the consumer price index. “This could help cool inflation further and stabilize mortgage rates below the 6% threshold this year,” she wrote.

The National Association of Realtors projects 30-year fixed mortgage rates will average 5.7% this year.

Kevin Dayton, vice president of mortgage lending at CrossCountry Mortgage in Melville, said interest from prospective homebuyers has rebounded after falling off in early November when mortgage rates eclipsed 7%. He said he's seeing almost as many requests for pre-approval letters and loan applications as at this time last year,  but there are fewer closings than usual because there are limited options for buyers.

"There's nothing on the market, so the [houses] that are nice that hit the market, every buyer is coming to look at,"  he said.

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