US mortgage rates surge to highest level in nearly three years
The average interest rate on the most common US home loan climbed by 0.25 percentage points last week, reaching 7.28%, as reported by Freddie Mac. This marks the largest weekly increase in nearly four years, pushing the 30-year fixed-rate mortgage to its highest level in almost three years. The surge coincided with a rise in US government bond yields, which mortgage rates typically follow. The 10-year US Treasury yield hit its highest point in nearly 25 years during the same period.
The rate hike followed revised economic data indicating stronger-than-expected growth in the first half of the year, fueling expectations of continued momentum into the third quarter. With inflation still exceeding the Federal Reserve's 2% target by over a percentage point, investors anticipate at least one more interest rate hike this year to combat inflation. Rising borrowing costs are already impacting the US housing market, with mortgage application volumes declining due to weaker demand.
The average 30-year mortgage rate has surged by more than 1.2 percentage points over the past seven months. Higher global energy costs and broader inflationary pressures, exacerbated by recent geopolitical tensions, have further complicated the interest-rate outlook for borrowers and homebuyers. This marks the sixth straight week of rising mortgage rates, according to the Mortgage Bankers Association.
MBA President and CEO Bob Broeksmit noted that the higher-rate environment has weakened affordability and borrower demand, affecting both prospective homebuyers and existing homeowners considering refinancing. The latest increase adds to the challenges facing the US housing market, which has already been grappling with high borrowing costs. For buyers, higher rates mean increased monthly loan payments, potentially delaying purchases or prompting consideration of less expensive properties. Homeowners looking to refinance may also find fewer opportunities to reduce their borrowing costs.