The average long-term mortgage rate in the United States hit its highest level this week since mid-March, driving up borrowing costs for potential buyers already constrained by a limited number of homes for sale.
The average for a 30-year fixed loan was 6.57%, down from 6.39% last week, Freddie Mac, the Mortgage Bankers Association and the Federal Housing Finance Agency said in a statement. With an average rate of 5.10% a year ago.
High rates can add hundreds of dollars a month to homebuyers, limiting what they can afford in a market that has become increasingly unaffordable after years of soaring home prices and limited homes for sale .
Meanwhile, current homeowners are reluctant to move and trade their historically low mortgage rates as new construction accounts for a growing share of transactions.
US mortgage rates hit their highest level since mid-March, with the average 30-year fixed loan at 6.57% from 6.39% last week
High rates can add hundreds of dollars a month to homebuyers, limiting what they can afford in a market that has become increasingly unaffordable after years of soaring home prices and limited homes for sale .
The Mortgage Bankers Association said the median monthly payment listed on the April home purchase loan application rose to $2,112, up nearly 12% from a year ago and 0.9% compared to March.
“The U.S. economy is showing continued resilience which, combined with debt ceiling issues, has led to higher mortgage rates this week,” said Sam Khater, chief economist at Freddie Mac.
“Reduced affordability remains an issue for interested homebuyers and homeowners seem unwilling to shed their low rates and put their homes on the market.
“If this difficult situation continues to limit supply, it could open an opportunity for builders to help solve the housing shortage in the country.”
The Bank Rate this week reported rates hitting around 7% – after two months of relative stability – their numbers indicated.
It comes after analysts warned that mortgage rates could rise to 8.4% if the United States fails to pay down debt.
President Joe Biden has just 7 days to prevent the country from defaulting on its debt for the first time in history, after failing to reach an agreement with House Speaker Kevin McCarthy.
A default could lead to delayed Social Security payments, lower investment and soaring mortgage rates
If a solution is not found on how to raise the government’s debt ceiling to $31.4 trillion, households will face fiscal chaos that could lead to the loss of seven million jobs and the fall investments.
Rates on a 30-year fixed mortgage haven’t topped 7% since early March, when they hit 7.1% on March 2 according to the Freddie Mac Index.
Since then, they have hovered around 6%, hitting a low of 6.35% on May 11.
A year ago, the average rate on a 30-year loan was just 5.36%.
Rates last October exceeded the 7% threshold for the first time in two decades – since April 2002.
Rates on a 30-year fixed mortgage haven’t topped 7% since early March, when they hit 7.1% on March 2 according to the Freddie Mac Index.
At that time, the average 30-year mortgage rate – the most popular home loan product – hit 7.08% following aggressive rate hikes by the Federal Reserve aimed at controlling inflation.
Rates then fell slightly over the following months and were around 6% in mid-January, causing a sharp increase in the number of buyers signing contracts on existing homes.
Experts warn that mortgage rates could continue to climb above 8% – reaching 8.4% in September – if the government is unable to pay its bills by June 1.
This would increase the cost of an average mortgage payment by 22%, according to real estate website Zillow.
Jeff Tucker, senior economist at Zillow, said: ‘Home buyers and sellers have finally adjusted to mortgage rates over 6% this spring, but a default could potentially drive up borrowing costs further and freeze deep into the market.
“Home values may not see a noticeable decline, but higher mortgage rates would seriously hurt affordability, especially for first-time buyers.”
He added that it was “extremely important” that lawmakers find a solution before a default occurs.
The threat of a default first emerged in January when the United States hit its $31.4 trillion debt ceiling.
Since then, the Treasury has used what it describes as “extraordinary measures” to keep its accounts afloat.
