The United States witnessed a sharp increase in the interest rates for its most favored home loans during the past week, marking the highest level seen since the turn of the millennium, according to a survey conducted by the Mortgage Bankers Association on Wednesday. The survey results unveiled a disconcerting trend, with a seventh consecutive weekly rise in mortgage rates and a significant drop in loan applications, now at their lowest point in 28 years.
The spotlight of the report shone on the average 30-year fixed-rate mortgage, which surged to an alarming 7.9% during the week ending on October 20th. This figure represented a notable 20 basis point increase from the previous week, leaving homeowners and prospective buyers grappling with the challenges posed by the relentless ascent in interest rates.
Joel Kan, Vice President and Deputy Chief Economist at the Mortgage Bankers Association, expressed his concern, stating, “Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995. These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity.”
This surge in borrowing costs to acquire residential properties occurred despite the Federal Reserve’s decision to halt its rate-hike campaign after reaching a peak of 5.2-5.5% in July. Since that point, the 30-year fixed-rate mortgage has experienced an unprecedented increase of 81 basis points, closely mirroring the yield on the 10-year Treasury note.
Interestingly, despite the soaring costs associated with home purchases, the United States housing market appears to remain resilient. This enduring strength is attributed to a period of robust home building and refinancing activity that reached its zenith in mid-2018. With mortgage rates expected to remain relatively stable at their current levels, Americans who are aspiring to become homeowners may find some solace in the near-term future.
Ann Saphir conducted the survey and reported on its findings, with editing assistance provided by Toby Chopra.
In summary, it is clear that prospective homebuyers now face the repercussions of the escalating mortgage rates, as applications for loans have spiraled to a 28-year low. Although the possibility of a substantial decline in these rates seems unlikely, those seeking to enter the housing market may find comfort in the fact that it remains robust and steady, defying the challenges posed by these soaring interest rates.
Source: Reuters
