US Mortgage Rates Soar to 9-Month High
Marking the sixth straight week of increases, US mortgage rates jumped to their highest level in over nine months, threatening to derail the ongoing housing rally.
According to the latest Freddie Mac data, the average rate for the 30-year fixed mortgage rose from 3.09% to 3.17% on Thursday, reaching the highest level since the week ending on June 11. Although borrowing costs continue to remain subdued relative to historic levels, mortgage rates have been on a steady climb since falling to a record-low of 2.65% in January. The rise in mortgage rates threatens to crash the ongoing housing rally that has decimated supply and sent home prices soaring to new highs.
Housing prices have been soaring across the US amid a surge in demand for real estate throughout the pandemic lockdowns. Potential homebuyers looking to relocate to more spacious homes amid work-from-home flexibility have put added strain on limited inventory, which has even led to bidding wars. The added mortgage rate increase is making it even more difficult for some to afford homes, creating a crowding-out effect as potential homebuyers are left with less purchasing power. “Unfortunately, this has disproportionately affected the low end of the market, where supply is the slimmest,” said Freddie Mac chief economist Sam Khater.
Mortgage rates have been positively correlated with 10-year Treasury yields, which last week soared to a 13-month high following the Federal Reserve’s recent remarks on allowing inflation to exceed its target rate until full employment is reached.
Information for this briefing was found via Freddie Mac, FRED, and the Federal Reserve. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
