Mortgage rates are the major topic of economic news today as the 30-year rate verges on 8%, the highest level since November 2000.
According to data from the Mortgage Bankers Association (MBA), the 30-year fixed rate hit 7.53% in the week ended Sept. 29. That’s an increase from 7.41% the week prior. Additionally, this marks the fourth consecutive week of rising mortgage rates.
The increase in mortgage rates was accompanied by a 6% drop in home loan applications, to its lowest reading since 1996.
According to Joel Kan, the MBA’s vice president and deputy chief economist, this is likely a response to 10-year Treasury yields, which closely correlate with mortgage rates. He said:
“Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields … As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996.”
This makes sense, as 10-year yields hit 4.8% this week, the highest level since the 2008 financial crisis.
More recently, Mortgage News Daily reported Tuesday
the 30-year rate has hit 7.72%.
Why Mortgage Rates Are the Talk of Economic News Today
Today’s news seemingly serves a well-established narrative: buying a house in the U.S. is becoming increasingly difficult. With mortgage rates at a multi-decade high, and home prices still on the rise, there’s been a clear decline in home demand as hordes of would-be buyers are priced out of the market.
Mortgage rates have been climbing since the Federal Reserve began raising interest rates last year in an effort to rein in inflation. While prices have been slowly but surely declining, it is not without costs — mortgage rates being one of them. With Fed Chair Jerome Powell leaving the door open for additional rate hikes at last month’s policy meeting, it’s unclear just how high mortgage rates will climb.
For context, the current monthly payment on a $300,000 home with a 20% down payment and 30-year fixed mortgage is $930 more than the average payment under 3% mortgage rates found during the Covid-19 pandemic.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
