US 30-year mortgage rate soars to highest since 2000 (updated)

Applied Energetics

23/08/2023 14:15

(Adds charts)
       Aug 23 (Reuters) - The interest rate on the most popular
U.S. home loan last week shot to the highest since December
2000, helping drive mortgage applications to a 28-year low, a
survey showed on Wednesday.
    The Mortgage Bankers Association said the average contract
rate on a 30-year fixed-rate mortgage climbed 15 basis points to
7.31% in the week ended Aug. 18. That came after yields on the
government bonds that influence home-loan rates surged to the
highest since the 2007-2009 financial crisis.
    Yields on Treasury securities have marched higher throughout
the summer as surprisingly strong data on the U.S. economy
reshaped investors' thinking about how long the Federal Reserve
will keep interest rates high. The Fed has lifted its benchmark
policy rate from near zero in March 2022 to 5.25% to 5.50%
currently to beat back the toughest inflation since the 1980s.
    In an otherwise resilient economy featuring a strong job
market and robust consumer spending, the housing market has
stood out as the sector most afflicted by the Fed's aggressive
actions to cool demand and undercut inflation.
As borrowing costs surged, home sales tumbled all last year and
a hoped-for recovery this year has yet to materialize. Case in
point: Sales of previously owned homes, accounting for the
majority of U.S. residential real estate transactions, fell for
a second month in July to the lowest pace since January.
    The MBA data does not point to improvement any time soon.
Its index measuring applications for a mortgage for a home
purchase sank 5% last week to the lowest since April 1995. It
was the largest weekly decline since April.
    Joel Kan, MBA's deputy chief economist, said, "Homebuyers
withdrew from the market due to the elevated rate environment
and the erosion of purchasing power. Low housing supply is also
keeping home prices high in many markets, adding to the
affordability hurdles buyers are facing."
    Applications to refinance existing loans fell to the lowest
since December, the MBA data showed.
    The vast majority of homeowners with existing mortgages have
a loan from before interest rates began surging in 2022, which
has been a headwind for refinancing activity. That dynamic is
also contributing to the lack of housing supply because it is a
disincentive to move.

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U.S. mortgage rates shoot to highest since 2000    https://tmsnrt.rs/45CPWSW
Mortgage application volumes plunge    https://tmsnrt.rs/3KTSmEB
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(Reporting By Dan Burns; Editing by Cynthia Osterman)
((mailto:Daniel.Burns@thomsonreuters.com;))