Mortgage rates rise amid debt ceiling drama
The 30-year fixed-rate mortgage rose to 6.57%, according to Freddie Mac’s weekly survey, while a daily survey put rates above 7%.
Key points:
- The potential default on the federal government’s debt, along with a still-overheated economy, are contributing to rate increases.
- Rising rates have been followed by fewer mortgage loan applications, which are down 30% year-over-year.
Mortgage interest rates continued to rise, fueled by concerns about the federal government defaulting on its debt.
Freddie Mac reported in its weekly survey that the 30-year fixed-rate mortgage averaged 6.57%, up from 6.39% the week before.
Debt ceiling concerns, and a U.S. economy that continues to remain resilient despite the Fed's effort to tamp down inflation, led to the higher rates, said Freddie Mac's Chief Economist Sam Khater.
Daily surveys show an upward trend as well. According to Mortgage News Daily, the average daily mortgage interest rate topped 7% this week.
Debt, Fed uncertainty weighing on the market
Jiayi Xu, an economist with Realtor.com, said that the federal debt impasse is impacting mortgage interest rates. A resolution that comes sooner rather than later would mitigate potential adverse effects on the housing market.
Xu also said the uncertainty noted in the Federal Reserve's meeting notes is affecting investors of treasury bonds, which in turn impacts mortgage interest rates. Investors, Xu said, were expecting a pause in rate hikes in June, but the meeting notes revealed a sense of uncertainty about where the Fed might go next.
Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta, told National Public Radio's Marketplace that he doesn't think a rate cut is happening until well into 2024.
"I think we're right at the beginning of the hard part," Bostic said on Marketplace, noting that as the economy gets closer to hitting the 2% inflation target, even more stress will be put on the labor market.
As interest rates continue to rise, mortgage applications continue to decrease. In the past week, purchase applications dropped 4.6% compared to the week earlier and were down 30% year-over-year, according to the Mortgage Bankers Association.
The 15-year fixed-rate mortgage averaged 5.97%, up from last week's 5.75%, according to the Freddie Mac survey. A year ago it was averaging 4.31%.