Mortgage rates rise to 6.57%, the highest level since mid-March, adding to the burden on homebuyers amid tight inventory.
- US mortgage rates rose to the highest level since mid-March with the average for a 30-year fixed loan 6.57 percent up from 6.39 percent last week.
- High rates can add up to hundreds of dollars a month in costs for home buyers already dealing with sky-high home prices and limited homes for sale.
The average long-term mortgage rate in the US rose to its highest level this week since mid-March, raising borrowing costs for prospective homebuyers already constrained by a shortage of homes for sale. .
The average for a 30-year fixed loan was 6.57 percent, up from 6.39 percent last week, Freddie Mac, the Mortgage Bankers Association and the Federal Housing Finance Agency said in a statement. . With the average rate of 5.10 percent a year ago.
High rates can add up to hundreds of dollars a month in costs for homebuyers, limiting what they can afford in a market that has become increasingly unaffordable after years of sky-high home prices and limited homes for sale.
Meanwhile, current homeowners are reluctant to move in and change their historically low mortgage rates as new construction accounts for an increasing share of transactions.
US mortgage rates rose to the highest level since mid-March with the average for a 30-year fixed loan 6.57 percent up from 6.39 percent last week.
The Mortgage Bankers Association said the average monthly payment listed on an April home purchase loan application rose from $2,112, up nearly 12 percent from a year ago and up 0.9 percent from March.
“The US economy is showing continued resilience which, combined with debt ceiling concerns, led to higher mortgage rates this week,” said Sam Khater, chief economist at Freddie Mac.
“Reduced affordability continues to be an issue for interested homebuyers and homeowners seem unwilling to lose their low rate and put their home on the market.
“If this situation continues to constrain supply, it could open up an opportunity for builders to help address the country’s housing shortage.”
Bankrate reported this week that rates shot up to around 7 percent, after two months of relative stability, its figures showed.
It comes after analysts warned that mortgage rates could soar to 8.4 percent if the United States defaults on its debt.
President Joe Biden has just 7 days to prevent the country from defaulting on its debt for the first time in history, after he failed to reach a deal with House Speaker Kevin McCarthy.
Without a solution on how to raise the government’s $31.4 trillion debt ceiling, households will face fiscal chaos that could lead to seven million job losses and falling investment.
Rates on a 30-year fixed mortgage have not exceeded 7 percent since early March, when they hit 7.1 percent on March 2 according to the Freddie Mac Index.
Since then they have hovered around 6 percent, hitting a low of 6.35 percent on May 11.
A year ago, the average rate on a 30-year loan was just 5.36 percent.
Last October, rates crossed the 7 percent threshold for the first time in two decades, dating back to April 2002.
A debt default could cause delays in social security payments, falling investments and rising mortgage rates
At the time, the average 30-year mortgage rate, the most popular home loan product, hit 7.08 percent as a result of the Federal Reserve’s aggressive rate hikes aimed at controlling inflation.
Rates then eased slightly in the months that followed and hovered around 6 percent in mid-January, triggering a big jump in buyers signing contracts on existing homes.
Experts warn that mortgage rates could continue to rise above 8 percent, reaching 8.4 percent in September, if the government can’t pay its bills by June 1.
This would raise the cost of an average mortgage payment by 22 percent, according to real estate website Zillow.
Jeff Tucker, senior economist at Zillow, said: “Home buyers and sellers have finally been adjusting to mortgage rates above 6 percent this spring, but a debt default could potentially drive up borrowing costs even further.” more and freeze the market.
“Home values may not see a noticeable drop, but higher mortgage rates would seriously affect affordability, especially for first-time homebuyers.”
He added that it was “of the utmost importance” that lawmakers find a solution before a breach occurred.
The threat of a default first arose in January when the US reached its debt ceiling of $31.4 trillion.
Since then, the Treasury has been using what it describes as “extraordinary measures” to keep its balance sheets afloat.