Daily 30-year mortgage rates have reached a significant milestone, hitting 8% on Wednesday afternoon. This increase puts even more pressure on prospective home buyers.
According to a survey conducted by Mortgage News Daily, the 30-year fixed mortgage rate has risen by 0.08 percentage points to reach 8.00%. This surge in rates is a result of rising yields on 10-year Treasury debt, which play a crucial role in determining mortgage rates. On Wednesday, the yield on the 10-year surpassed 4.9%.
These climbing mortgage rates bring further bad news for those looking to buy a home. These potential buyers are already dealing with low inventory, relatively stable prices, and higher financing costs. It is expected that these recent developments will contribute to a decrease in September home sales.
Freddie Mac is scheduled to release their weekly data on mortgage rates on Thursday. According to Freddie Mac, the last time this closely watched indicator hit 8% was back in 2000.
Additional data also supports the trend of increasing rates. The Mortgage Bankers Association reported that the average 30-year fixed rate on loans with conforming balances was 7.70% last week, up from 7.67% the previous week. It is worth noting that daily rates, such as those published by Mortgage News Daily, often tend to be higher than weekly measures.
Higher interest rates dampen demand for new loans
The Mortgage Bankers Association, a trade group, reported a significant decrease in loan applications for home purchases. In the week ending October 12th, applications slumped by 6% on a seasonally adjusted basis compared to the previous week. The association’s Market Composite Index, which measures overall application activity for purchases and refinances, also dropped by 6.9% on a seasonally adjusted basis – marking its lowest reading since 1995.
According to Joel Kan, the MBA’s deputy chief economist, the decline in homebuying activity is primarily driven by higher interest rates and the persistent shortage of available inventory. Reduced purchasing power has limited buyers’ ability to enter the market.
Housing starts show signs of improvement
In September, there was a 7.0% increase in housing starts, a key indicator of new-home construction. The Census Bureau released data showing a seasonally adjusted annual rate of 1.358 million housing starts for that month. This positive growth followed a significant drop in the prior month’s numbers. Notably, the rise was primarily driven by multifamily projects.
Despite the encouraging September figures for housing starts, the SPDR S&P Homebuilders exchange-traded fund (ticker: XHB) experienced a 2.6% decline on Wednesday. Similarly, the iShares U.S. Home Construction ETF (ITB) saw a drop of 2.1%.
