Mortgage interest rates rise to 6.57%, the highest level since mid-March

Average long-term mortgage rates in the US rose this week to their highest level since mid-March, driving up borrowing costs for potential homebuyers already constrained by a sparse number of homes for sale.

The average for a 30-year, fixed loan was 6.57 percent, compared to 6.39 percent last week, Freddy Macthe Mortgage Bankers Association and the Federal Housing Finance Agency said in a statement. With the average rate 5.10 percent a year ago.

High rates can add hundreds of dollars a month to costs for homebuyers, limiting what they can afford in a market that has become increasingly unaffordable after years of rising home prices and a limited number of homes for sale.

Meanwhile, current owners are reluctant to move in and trade in their historically low mortgage rates – as new construction makes up an increasing share of transactions.

High rates can increase hundreds of dollars a month in costs for homebuyers, leaving them with less to pay in a market that has become increasingly unaffordable after years of rising home prices and a limited number of homes for sale

The Mortgage Bankers Association said the median monthly payment listed on the April home purchase loan application rose from $2,112 to nearly 12 percent from a year ago and 0.9 percent from March.

“The US economy is showing continued resilience which, combined with debt ceiling concerns, has led to higher mortgage rates this week,” said Sam Khater, Freddie Mac’s chief economist.

Cushioned affordability continues to be a problem for interested homebuyers, and homeowners seem unwilling to shed their low rate and put their homes on the market.

“If this predicament continues to limit supply, it could present an opportunity for builders to address the country’s housing shortage.”

Bankrate reported this week that interest rates shot up to about 7 percent — after two months of relative stability — their numbers indicated.

It comes after analysts warned mortgage rates could rise to 8.4 percent if the US defaulted on its debts.

President Joe Biden has just 7 days to avoid the country defaulting on its debts for the first time in history after failing to reach a deal with House Speaker Kevin McCarthy.

If a solution is not reached on how to raise the $31.4 trillion government debt ceiling, households will face fiscal chaos, which could lead to the loss of seven million jobs and the collapse of investment.

Rates on a 30-year mortgage have not increased more than 7 percent since early March, when they hit 7.1 percent on March 2, according to the Freddie Mac Index.

Since then, they have hovered around 6 percent, reaching a low of 6.35 percent on May 11.

A year ago, the average interest rate on a 30-year loan was only 5.36 percent.

Last October, rates rose above the 7 percent threshold for the first time in twenty years — since April 2002.

A default can cause Social Security payments to be delayed, investments to fall, and mortgage rates to rise

At the time, the average 30-year mortgage rate — the most popular home loan product — reached 7.08 percent as a result of the Federal Reserve’s aggressive rate hikes designed to curb inflation.

Rates then fell slightly in the following months and stood at about 6 percent by mid-January, leading to a large increase in buyers signing contracts for existing homes.

Experts warn that mortgage rates could continue to climb above 8 percent — reaching 8.4 percent in September — if the government is unable to pay its bills by June 1.

This would increase the cost of an average mortgage payment by 22 percent, according to real estate website Zillow.

Jeff Tucker, a senior economist at Zillow, said: “Home buyers and sellers have finally adjusted to mortgage rates above 6 percent this spring, but a default could potentially push borrowing costs even higher and send the market into a deep freeze. to take.

“House values ​​may not fall significantly, but higher mortgage rates would seriously affect affordability, especially for first-time buyers.”

He added that it was “critical” for lawmakers to find a solution before a default occurs.

The threat of bankruptcy first emerged in January, when the US hit the $31.4 trillion debt ceiling.

Since then, the Treasury has used what it describes as “extraordinary measures” to keep its balance sheet afloat.