US 30-year mortgage rate surges to 6.73%, highest since July

Oct 30 (Reuters) - The interest rate for the most popular U.S. home loan jumped last week to 6.73%, its highest since July, adding to headwinds for the housing market even as the Federal Reserve looks set to further lower its target for short-term borrowing costs.

The average contract rate on a 30-year fixed-rate mortgage rose 21 basis points in the week ended Oct. 25, the Mortgage Bankers Association said on Wednesday.

The main home-loan rate is now 60 basis points above where it was immediately after the Fed's mid-September meeting, when the central bank made an initial half-of-a-percentage point cut to the policy interest rate and signaled more reductions to come.

Mortgage rates, which had been falling on anticipation of the Fed's move, almost immediately began climbing again, as stronger-than-expected data including a jump in spending and big job gains allayed concerns that the Fed would cut rates aggressively to shore up the economy.

In addition, traders have been piling into bets that both inflation and interest rates could stay high if Donald Trump takes the White House and his Republican party takes control of Congress in next week's hotly contested elections. U.S. 10-year Treasury yields, which mortgage rates track closely, hit a nearly four-month high on Tuesday.

Refinancing applications slumped last week, the MBA said, and now account for just 43.1% of total mortgage applications. That's below the historic median of 48%.

Sales of existing U.S. homes dropped

to a 14-year low in September, the National Association of Realtors reported last week.

"The recent run-up in rates is likely to push existing home sales lower in the coming months," Goldman Sachs analysts wrote on Sunday, days before this additional leg up in mortgage rates. (Reporting by Ann Saphir; Editing by Leslie Adler)