Last Updated on October 6, 2023 by Robert C. Hoopes
U.S. mortgage interest rates have hit a record high not seen since November 2000, causing a significant decline in home loan applications. According to reports, the average weekly rate on a 30-year fixed mortgage has risen to 7.53%, up from the previous week’s 7.41%.
As a result of these increased rates, there has been a noticeable 6% decrease in home loan applications. This drop represents the lowest level of applications in 27 years. Experts are attributing this decline to the rise in yields on the 10-year Treasury note, which has reached its highest level since the global financial crisis at 4.8%. These increased yields directly affect mortgage rates, causing them to rise as well.
The spread between 10-year note yields and 30-year mortgage rates has also widened, reaching near-record levels. This means that potential homebuyers face higher borrowing costs, making it more difficult for them to afford to purchase a home. Many buyers are now seeking more affordable options, leading to an increase in activity for adjustable-rate mortgages (ARMs). The percentage of buyers opting for ARMs rose to 8% from 7.5% as they look for lower initial payment options.
This recent increase in mortgage rates marks the fourth consecutive week that rates have risen. Experts point to the Federal Reserve’s aggressive rate hike campaign since March 2022 as a significant factor contributing to the widening spread between Treasury yields and mortgage rates.
For those looking to enter the housing market, these higher mortgage rates may represent a challenge. As rates continue to rise, potential homebuyers must carefully weigh their options and consider if now is the right time to make a purchase. Meanwhile, the real estate market is closely watching developments and anticipating how these higher rates will impact the industry moving forward.