Average US long-term mortgage rates retreat to 5.3%

WASHINGTON (AP) — Average long-term U.S. mortgage rates retreated this week just as the Federal Reserve announced another big rate hike in its bid to get four-decade high inflation under control.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate fell back to 5.3% from 5.54% last week. One year ago the average 30-year rate was 2.8%.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes also retreated, to 4.58% from 4.75% last week. A year ago at this time the rate was 2.1%.

The Fed on Wednesday ratcheted up its main borrowing rate by three-quarters of a point, the second such increase in less than two months. The central bank also raised its benchmark rate by a half-point in May.

Rapidly hiking rates risks tossing the U.S. economy into a recession, but it’s the Fed’s most powerful tool to get price increases back to its 2% annual target.

Also Thursday, the Commerce Department reported that the U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession.

The decline that the Commerce Department reported Thursday in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.

Consumer prices have soared 9.1% over the past year, the biggest yearly increase since 1981. The Labor Department's producer price index — which measures inflation before it reaches consumers — rose by 11.3% in June compared with a year earlier.

Higher borrowing rates have discouraged house hunters and cooled what was a red-hot housing market, one of the most...