On Wednesday, the average U.S. 30-year mortgage rate surged to its highest point in nine months. This increase marked the second-highest rate since 2001, as interest rates responded significantly to a downgrade in U.S. government debt.
The average 30-year mortgage rate surged to 7.09% for the week ending on August 4th, marking a 16 basis point increase from the previous week’s rate of 6.93%. This information comes from a weekly report released by the Mortgage Bankers Association. These rates haven’t been this high since November 2022, which was already the highest level seen since 2001. As a result of the rising borrowing costs, potential borrowers swiftly adjusted, leading to a 3.1% drop in the mortgage applications index. This index measures the overall volume of mortgage applications and reached a six-month low at 194.5.
Joel Kan, the Vice President and Deputy Chief Economist of the Mortgage Bankers Association, highlighted Fitch’s recent downgrade of U.S. government debt, impacting various loan types in the weekly survey.
Recent information indicates that the Federal Reserve’s aggressive interest rate hikes aimed at cooling home prices might be losing momentum. Despite decreased demand over the past year, the limited housing inventory has continued to drive prices higher. However, the latest data revealing elevated mortgage rates and reduced demand could be seen as positive for overall housing expenses and the U.S. central bank’s endeavor to curb inflation.