Mortgage rates in US hit highest in over 20 years: Report
2 Min Read
American home loan rates have surged to their highest level in over two decades, nearing 8%, thus creating concerns for the housing market's recovery and affordability.
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A maintenance worker sweeping the street in front of a row of new homes in Fairfax, Virginia, on Aug. 22, 2023 (AFP)
Home loan interest rates have surged to their highest point in over two decades, inching close to 8%, following an assertive campaign by the Federal Reserve to hike interest rates.
The average rate for a 30-year fixed mortgage catapulted to 7.49% this week, marking the first occurrence since late 2000 that rates have soared to this extent.
This shift is casting a shadow over the post-COVID real estate market recovery, intensifying challenges for potential homebuyers and current homeowners. Data from Mortgage News Daily has illuminated this concerning trend, spotlighting potential repercussions for the housing sector.
Read more: US housing crisis, untamed inflation could lead to recession
This surge in rates has triggered a notable downtrend in home-purchase applications, spanning six consecutive weeks and driving figures to their lowest point since 1995. The Mortgage Bankers Association has reported that escalating costs are creating barriers to homeownership for a substantial segment of the American population, exacerbating financial strain.
Market sentiments predicting sustained elevated rates have further contributed to this unsettling trajectory, establishing a challenging landscape for borrowers seeking various types of loans, the report adds.
According to Bloomberg, despite the upheaval, numerous US officials anticipate substantial inflation risks that could necessitate further interest rate hikes.
Read more: Americans are worried about rent for 2023
As borrowing expenses surge, the strain on the residential housing market is projected to intensify, potentially compounding the existing challenges faced by the market.
The month of July witnessed a discernible decline in home sales, with a remarkable 16.6% plunge in sales of previously owned homes compared to July 2022.
Data provided by the National Association of Realtors highlighted homeowners' reluctance to sell as they grapple with the prospect of locking into higher-interest mortgages.
