US Housing Market Faces Another Cold Spell... Mortgage Rates Near 7%

Recently, as U.S. Treasury yields surged, U.S. mortgage rates also reached their highest level in about six months.

On the 9th (local time), Freddie Mac, a U.S. government-sponsored mortgage company, announced that the average interest rate on 30-year fixed-rate mortgages rose from 6.91% last week to 6.93%. This marks a step closer to the psychological resistance level of '7%' for homebuyers and is the highest figure since early July last year (6.95%). One year ago, it was 6.66%.

Mortgage rates follow the U.S. 10-year Treasury yield, which serves as a benchmark for market interest rates. Mortgage rates peaked at 7.22% in early May last year, then dropped to 6.08% in September following a big rate cut (0.5 percentage points) by the central bank, the Federal Reserve (Fed), but have been on the rise since.

The increase in the 10-year Treasury yield is due to expectations that inflation will ignite from policies such as tariff hikes by U.S. President Donald Trump. The 10-year Treasury yield briefly rose to 4.73% the day before, marking the highest level since April last year.

The rise in mortgage rates could negatively impact the recently recovering homebuying sentiment. When mortgage rates approached 8% during 2022?2023, homeowners refrained from listing their properties to maintain mortgages obtained at lower rates before COVID-19, leading to a supply shortage and a sharp increase in home prices. According to the Mortgage Bankers Association (MBA), loan applications for home purchases showed a declining trend at the end of last month due to rising mortgage rates.

Sam Carter, chief economist at Freddie Mac, explained that "as the economy continues to show solid momentum, it is exerting upward pressure on mortgage rates," and that this, along with high home prices, is negatively affecting home sales.