US mortgage rates hit a new 16-year high of 6.81%, triggering an accelerating rise in borrowing costs, heralding a bigger hit to the housing market. The Wall Street Journal reported today a continuous trend may lead to a greater foreclosure than the last seen in 2007, more on this at WSJ Digital Subscription.
This rate increase is the eighth consecutive increase, the interest rate on a 30-year fixed mortgage rose 6 basis points in the first week of October, suggesting a problem caused by heavy lending, reported the New York Times Digital Subscription. The increase in mortgage rates has affected the housing market across the country on both purchases and refinances, dropping applications by 2%, the eighth drop in nine weeks, something not seen since 1997.
Mortgage rates have soared nearly 1.4 percentage points since late July as Treasury yields have risen in response to the Federal Reserve’s stepped-up fight against inflation.
Mortgage rates will continue to rise, considering that the yield on the 10-year Treasury note has continued to rise this week. MB Daily News, which is updated more frequently, put the 30-year rate at 7.14% on Tuesday.
The 30-year effective fixed rate of the MBA increased to 7.09% in the period that ended October 7, the highest since 2006. This includes the effects of compounding.
The MBA home application index fell 2.1% to 170.5, the lowest level since 2015, while the refinancing indicator fell 1.8% to a new 22-year low.
The MBA survey, conducted weekly since 1990, uses responses from mortgage bankers, commercial banks, and savings banks. The data covers more than 75% of all US retail and residential mortgage applications.