Mortgage Interest Rates in the US Reach Highest Level Since 2000
According to a report released on Wednesday, U.S. mortgage interest rates have risen to their highest level since November 2000. This increase has led to a significant decline in home loan application volumes, reaching the lowest levels seen in 27 years.
The Mortgage Bankers Association (MBA) released data showing that the average weekly rate on a 30-year fixed mortgage reached 7.53% in the week ending September 29, up from the previous week’s rate of 7.41%. This increase in rates, coupled with the rise in Treasury yields, has resulted in a 6% decrease in home loan applications.
Joel Kan, the MBA’s Vice President and Deputy Chief Economist, attributed the rise in rates to the recent increase in Treasury yields, stating, “Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields.” As a result, mortgage applications dropped to their lowest level since 1996.
The main benchmark for determining mortgage rates is the 10-year Treasury note yield, which has reached its highest level since the global financial crisis. Currently standing at 4.8%, this increase in yields has had a direct impact on mortgage rates.
Additionally, the spread between the 10-year note yields and 30-year mortgage rates is near record-wide levels. This has further contributed to the rise in borrowing costs for prospective homebuyers. Since the Federal Reserve began its aggressive rate hike campaign in March 2022, the spread has progressively widened and currently stands around 3 percentage points.
This is the fourth consecutive week that mortgage rates have risen. In response, the share of activity for adjustable-rate mortgages (ARMs) has increased to 8% – the highest level since March. Buyers are exploring more affordable payment options, and ARMs typically offer lower introductory rates that reset after a designated period.
The impact of these rising rates on the housing market remains to be seen. However, it is expected that potential homebuyers may delay their purchasing decisions or opt for more affordable financing options. The continued increase in mortgage rates could also lead to a slowdown in the housing market as higher borrowing costs make it more difficult for buyers to afford properties.
In conclusion, the U.S. mortgage interest rates have reached their highest level since 2000, resulting in a significant decline in home loan application volumes. The rise in Treasury yields, coupled with a widening spread between note yields and mortgage rates, has contributed to the increased borrowing costs for prospective homebuyers. As the housing market reacts to these higher rates, the long-term implications remain uncertain.