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Average long-term US mortgage rate climbs to 6.79% this week, highest level since November

by Lucas Garcia
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mortgage rates

Average long-term US mortgage rate reaches highest level since November

LOS ANGELES (BBN) — The average long-term U.S. mortgage rate has climbed this week to its highest level since November. This increase is driving up borrowing costs for potential homebuyers, at a time when the housing market is hindered by a near record-low inventory of homes.

Mortgage rates on the rise

Mortgage buyer Freddie Mac reported on Thursday that the average rate on the benchmark 30-year home loan rose to 6.79%, up from 6.57% last week. Compared to a year ago, the rate has increased from an average of 5.09%. This marks the third consecutive increase in as many weeks, pushing the average rate on a 30-year home loan to its highest level since it surged to 7.08% in early November.

The average rate on 15-year fixed-rate mortgages, which are popular among those refinancing their homes, also rose to 6.18% this week from 5.97% last week. In comparison, a year ago, it averaged 4.32%.

Impact on homebuyers and market conditions

High mortgage rates can significantly increase monthly costs for homebuyers, limiting their purchasing power in a market that remains unaffordable for many Americans. After years of soaring home prices and historically low housing inventory, the housing market continues to pose challenges for potential buyers.

Factors contributing to rate increases

Mortgage rates have risen in tandem with the 10-year Treasury yield, which serves as a benchmark for loan pricing. The yield reached 3.81% last week, its highest level since early March, reflecting uncertainty among bond investors regarding the possibility of a U.S. debt default and renewed concerns about the Federal Reserve’s interest rate hikes.

Sam Khater, Freddie Mac’s chief economist, explained, “Mortgage rates jumped this week, as a buoyant economy has prompted the market to price-in the likelihood of another Federal Reserve rate hike. Although there has been a steady flow of purchase demand around rates in the low- to mid-6% range, that demand is likely to weaken as rates approach 7%.”

Uncertainty and future outlook

While the House of Representatives approved a deal to prevent a potential default on the U.S. government’s debt, uncertainty remains regarding the Federal Reserve’s actions at its upcoming interest rate policy meeting. This uncertainty, coupled with investors’ expectations for inflation and global demand for U.S. Treasurys, could contribute to increased volatility in mortgage rates.

Fed Chair Jerome Powell and other central bank officials have suggested a possible pause in interest rate hikes, allowing the Fed to assess the economic impact of previous increases. However, a pause now does not rule out the possibility of future rate hikes, especially since some Fed officials continue to support them due to persistently high inflation levels.

Slow recovery and reduced demand

The U.S. housing market has experienced a sluggish recovery this year, with elevated mortgage rates and a limited inventory of homes available for sale. As a result, home purchase loans in the first quarter were down 44.3% compared to the same period last year, according to real estate data firm Attom. Additionally, demand for mortgage refinancing loans has sharply declined by 72.5% in the first quarter year-over-year.

What is the average long-term US mortgage rate?

The average long-term US mortgage rate refers to the average interest rate charged on long-term home loans in the United States. It is a benchmark used to determine borrowing costs for homebuyers.

Why has the average long-term US mortgage rate climbed to its highest level since November?

The average long-term US mortgage rate has increased due to several factors. These include rising 10-year Treasury yields, uncertainty surrounding the possibility of a US debt default, concerns about the Federal Reserve’s interest rate hikes, and market expectations for inflation and global demand for US Treasurys.

How do higher mortgage rates impact homebuyers?

Higher mortgage rates can significantly increase borrowing costs for homebuyers. This can limit their purchasing power and affordability in a housing market that is already challenging due to elevated home prices and low inventory levels.

What is the current state of the US housing market?

The US housing market has been slow to recover this year. Limited inventory of homes available for sale, coupled with high mortgage rates, has hindered sales and reduced demand. As a result, home purchase loans have decreased, and there has been a significant decline in demand for mortgage refinancing loans.

Will mortgage rates continue to rise in the future?

The future trajectory of mortgage rates is uncertain and depends on various factors such as economic conditions, Federal Reserve policies, inflation rates, and market dynamics. While some officials have suggested a possible pause in interest rate hikes, the potential for future rate increases remains a possibility, particularly if inflation levels remain elevated.

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