US Housing Market Faces New Hurdles as Mortgage Rates Hit 7% Threshold
The US housing market is facing new challenges as mortgage rates continue to rise. The average rate on a 30-year fixed-rate home loan has climbed to just below 7%, its highest level in over 19 months, according to Freddie Mac.
This marks the fourth week in a row that mortgage rates have increased, and experts warn that higher borrowing costs could limit homebuyers' purchasing power. The average rate for a 30-year fixed-rate mortgage rose from 6.76% last week to 6.95%, while the benchmark 10-year Treasury yield, which lenders use as a guide to pricing home loans, breached 5% on Monday for the first time since 2023.
The Federal Reserve's decision to increase its key interest rate could also put upward pressure on mortgage rates, and experts predict that another rate hike may occur later this year. 'The rate hike all but guarantees that mortgage rates will remain stuck at or above the 7% threshold, which creates a psychological and financial barrier that will sharply squeeze affordability and sideline even more prospective buyers,' said Lisa Sturtevant, chief economist at Bright MLS.
The US housing market has been in a slump since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied U.S. homes were essentially flat last year, stuck at a 30-year low, and the Federal Reserve's rate hike could further slow down the market.