Rising mortgage rates are intensifying pressure on the US housing market, with the average long-term home loan rate climbing to its highest level in nine months, further weakening affordability for buyers, according to the Associated Press.
Rate Increase Details
Freddie Mac reported on Thursday that the average rate on a 30-year fixed mortgage rose to 6.53 percent, up from 6.51 percent the previous week. A year ago, the rate stood at 6.89 percent. The increase comes as higher oil prices and inflation concerns continue to push up borrowing costs across the US economy.
Impact of Geopolitical Factors
Mortgage rates have largely moved higher since the conflict involving Iran disrupted oil flows through the Persian Gulf, lifting global crude prices and influencing bond yields. The average rate on a 15-year fixed mortgage, commonly used for refinancing, also increased to 5.87 percent from 5.85 percent last week, according to Freddie Mac.
Spring Homebuying Season Affected
Higher mortgage rates have started affecting housing demand during the spring homebuying season. Sales of previously occupied homes remained mostly flat last month after declining year-on-year in the first quarter, continuing a broader slowdown in the housing market that began in 2022 as borrowing costs rose sharply. New home sales also weakened. Data from the US Census Bureau showed sales of newly built homes fell 6.2 percent in April to a seasonally adjusted annual rate of 622,000 units.
Mortgage Applications Decline
Mortgage application data also pointed to softer demand. The Mortgage Bankers Association reported that total mortgage applications fell 8.5 percent last week as rates moved higher, with refinancing activity accounting for a large part of the decline. At the same time, applications for loans to purchase homes continued to run ahead of last year's levels.
Economist Insights
Economists noted that homebuyers are seeing more options in the market, but elevated borrowing costs are limiting affordability gains from softer home prices. "Buyers have more homes to choose from and asking prices continue to soften, but their dollars don't stretch as far as they did a few months back," said Jake Krimmel, senior economist at Realtor.com. "A resolution to the (US-Iran) conflict, therefore, would do a world of good for mortgage rates, consumers, and housing market momentum," he added.
