According to a survey conducted by the Mortgage Bankers Association, US mortgage rates reached the highest level in over two decades at the end of last month. The surge was attributed to the Federal Reserve’s campaign to increase interest rates. The average 30-year fixed mortgage contract rate rose by 12 basis points during the reporting period, hitting 7.53% on Friday. This marks the first time the rate has surpassed 7.5% since November 2000, compared to just over 5.5% this time last year.
In practical terms, this increase in mortgage rates has significant implications for homeowners. For example, a $400,000, 30-year mortgage that would have cost $1,800 a month last year now costs nearly $1,000 more at the current rate. This rise in rates has put growing pressure on homebuyers, impacting their affordability and purchasing power.
The survey also revealed that home-purchase applications declined by 5.7% during the reporting period, reaching the lowest level since 1995. This decrease can be attributed to the higher mortgage rates, making it more challenging for potential buyers to enter the market.
Additionally, Mortgage News Daily reports that mortgage rates have continued to rise this week. As of Tuesday, the 30-year fixed mortgage rate stood at 7.72%. The US housing market has been suffering as a result of multiple interest rate hikes by the Federal Reserve since early last year. More recently, a surge in bond yields has further impacted the housing market.
Yields on the 10-year US Treasury bond, which influence mortgage rates and other forms of borrowing, climbed to 4.8% on Tuesday. This is the highest level since 2007. The increase followed the release of labor turnover data for August, which showed a higher-than-expected number of job openings. Investors interpreted this as a sign of continued tightness in the labor market, leading to concerns about inflation and potential future interest rate hikes.
There are mixed messages from the Federal Reserve regarding the possibility of further interest rate increases this year. While some officials anticipate rates to remain elevated through next year due to persistent inflationary pressures, others are uncertain. The Fed has two remaining policy meetings in 2023, which will likely provide further insight into their plans.
The current state of the housing market and the surge in mortgage rates highlight the challenges faced by homebuyers and the potential impact on homeownership rates. The Federal Reserve’s decisions regarding interest rates will continue to have a significant influence on the housing market and overall economic conditions.
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