US Mortgage Rates Brush 7% Threshold, Threatening Housing Market Recovery
The US housing market continues to face significant challenges as mortgage rates approach 7%, their highest level in over 19 months. The average rate for a 30-year fixed-rate home loan has been rising steadily, reaching 6.95% this week from 6.76% last week, according to Freddie Mac.
This marks the fourth consecutive week of increasing mortgage rates, which can add hundreds of dollars to borrowers' monthly costs and limit their purchasing power. The higher borrowing costs are largely due to rising inflation expectations amid surging oil prices, as well as the Federal Reserve's decision to increase its key interest rate for the first time in three years.
Experts warn that mortgage rates may remain stuck at or above 7% threshold, further squeezing affordability and sidelining prospective buyers. The US housing market has been sluggish since 2022, with sales of previously occupied homes stuck at a 30-year low last year and slowing again last month.
Lisa Sturtevant, chief economist at Bright MLS, noted that the rate hike 'all but guarantees' mortgage rates will remain high, creating a psychological and financial barrier for homebuyers. The Fed's decision to signal another potential rate hike later this year could further exacerbate the situation.