Reuters/Washington

US home resales rose in July to their highest level in over three years, suggesting a sharp increase in borrowing costs is having only a limited impact on the housing market’s recovery.

The National Association of Realtors said yesterday that existing home sales jumped 6.5% to an annual rate of 5.39mn units.

That was well above analysts’ expectations and could make the US Federal Reserve more comfortable with its plans to wind down a major economic stimulus programme.

Expectations the US central bank will begin tightening policy next month have pushed interest rates on mortgages sharply higher, but home buyers appeared undeterred in July.

“The basic take-away is that the rise in mortgage rates has been manageable,” said Ryan Sweet, an economist with Moody’s Analytics in West Chester, Pennsylvania.

Indeed, some home buyers might be rushing to make purchases now ahead of further rate hikes, said Millan Mulraine, an economist at TD Securities in New York.

“Given this, we expect to see some moderation in activity in the coming months, as higher mortgage rates take some of the air from the recovery,” Mulraine said.

After being devastated by a financial crisis and the 2007-09 recession, the US home market appeared to turn a corner early last year, helped by steady job creation and extremely low interest rates.

July’s increase marked the fastest pace of sales since November 2009, when a home buyer tax credit was expiring.

Since early May, mortgage rates for 30-year loans have risen more than a percentage point.

Last week, the average rate for a 30-year mortgage rose 12 basis points to 4.68%, the Mortgage Bankers Association said in a report yesterday..

The higher rates are already making it harder for people to refinance their loans. The MBA said applications for US home loans fell 4.6% in the week ended Aug 16 as refinancing activity slumped.

The Fed currently buys $85bn a month in bonds in an effort to reduce borrowing costs.

Economists polled by Reuters had expected sales to increase to a 5.15mn unit pace in July. Sales rose in all four major regions in the country.

The housing market recovery, marked by a surge in prices and dwindling inventories, is helping to shore up the economy by bolstering household finances and supporting consumer spending.