Mortgage Rates Reach New Heights, Homeownership Becomes Elusive
The American dream of homeownership is becoming increasingly out of reach as mortgage rates continue to soar. This week, the benchmark 30-year fixed rate loan rate climbed to 6.93%, its highest level since July, according to Freddie Mac. This marks the fourth consecutive week of rate hikes, making it even more challenging for would-be homebuyers to enter the market.
Rising Bond Yields Drive Mortgage Rate Increases
The surge in mortgage rates is largely attributed to the rise in bond yields, specifically the yield on the U.S. 10-year Treasury. Since mid-September, the yield has jumped from 3.62% to 4.66% this week, influencing lenders to price mortgages higher.
Home Prices Continue to Rise, Further Limiting Affordability
As mortgage rates increase, home prices are also on the upswing, creating a perfect storm of unaffordability. Despite a slight uptick in sales of previously occupied U.S. homes in November, the housing market remains sluggish and is on track for its worst year since 1995.
Federal Reserve’s Rate Hike Expectations Impact Mortgage Rates
The Federal Reserve’s decision to slow down rate cuts has contributed to the rising interest rates. With inflation still above the central bank’s 2% target, the Fed is taking a cautious approach, signaling only two rate hikes this year. Additionally, economists are concerned that President-elect Donald Trump’s economic policies, including his plan to increase tariffs on imports, could fuel inflation further.
15-Year Fixed-Rate Mortgage Rate Also Reaches New High
The average rate on a 15-year fixed-rate mortgage, a popular choice for homeowners seeking to refinance, has also reached its highest level since July, ticking up to 6.14%. This marks a significant increase from 5.87% a year ago, according to Freddie Mac.
As the housing market continues to struggle, it remains to be seen how these rising mortgage rates will impact the economy in the long run. One thing is certain, however – homeownership is becoming increasingly elusive for many Americans.
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