Mortgage Rate Spike Hits Lowe's and Home Depot Hard

The 30-year fixed-rate mortgage rate has reached a one-year high of 6.71%. This increase is directly correlated to the rise in yields on the 10-year U.S. Treasury note, which has surged due to persistent inflation, ongoing tensions between the U.S. and Iran, and growing concerns about the nation's mounting debt.

Lowe's and Home Depot, two companies heavily tied to the housing market, have seen their businesses impacted by the rising mortgage rates. Lowe's recently lowered its full-year outlook, citing pressure from high interest rates, inflation, and gas prices on DIY demand. The company now expects sales of $92 billion and has reduced its operating margin guidance.

Home Depot, while reaffirming its full-year outlook, also noted the challenges facing the housing market. CFO Richard McPhail stated that housing turnover has been at historic lows for four years due to affordability issues and people holding onto historically low interest rates from the pandemic. Despite these conditions, Home Depot managed to grow revenue by 5.7% year over year in the second quarter.