Safiyah Riddle Wed, August 9, 2023, 11:21 AM EDT
By Safiyah Riddle
(Reuters) – The average U.S. 30-year mortgage rate jumped to a nine-month peak on Wednesday and hit the second-highest rate since 2001, as interest rates reacted sharply to a downgrading of U.S. government debt.
The average 30-year mortgage rate shot up to 7.09% for the week ending Aug. 4, a 16 basis point increase from the previous week’s 6.93% rate, according to a weekly report released by the Mortgage Bankers Association. Rates have not been that high since November 2022, which were then the highest levels since 2001. Potential borrowers adjusted promptly to the surging cost of borrowing: the mortgage applications index – a measure of total mortgage application volume – fell 3.1% to a six-month low of 194.5.
Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist, pointed to Fitch’s recent downgrading of U.S. government debt, which affected all types of loans on the weekly survey.
Recent data has suggested that the home price cooling engineered by the Federal Reserve’s aggressive interest rate hiking campaign could be slowing down. While demand in the past year has waned, a severely limited housing stock has kept upward pressure on prices. But the recent data showing higher mortgage rates and crimped demand could be welcome news for overall shelter costs and the U.S. central bank’s effort to bring inflation down.
(Reporting by Safiyah Riddle; Editing by Andrea Ricci)