Mortgage Rates Hit Six-Month High, Squeezing Potential Buyers
The US housing market is facing a new challenge as mortgage rates have surged to a fresh six-month high, making it even more difficult for potential buyers to enter the market. This upward trend, combined with elevated house prices, is expected to further limit access to homeownership.
Rates Climb Despite Fed’s Easing Cycle
The average rate on the popular 30-year fixed-rate mortgage has risen to 6.93%, up from 6.91% last week and 6.66% during the same period a year ago. This increase comes despite the Federal Reserve’s decision to cut its policy rate by 100 basis points last year, marking the beginning of its easing cycle in September.
Economic Resilience and Policy Worries Drive Up Yields
Mortgage rates have been tracking U.S. Treasury yields, which have skyrocketed amid concerns about the economy’s resilience and the potential impact of President-elect Donald Trump’s proposed policies. These policies, including tax cuts, higher tariffs on imported goods, and mass deportations, have raised investor worries about inflation.
Housing Affordability Takes a Hit
“The robust economy has exerted upward pressure on mortgage rates, which, coupled with high home prices, continues to erode housing affordability,” noted Sam Khater, chief economist at Freddie Mac. Additionally, the lack of entry-level supply remains a significant issue, particularly for those looking to become first-time homeowners.
A Challenging Landscape for Homebuyers
As mortgage rates continue to rise, potential buyers are facing a daunting task. With elevated house prices and limited entry-level supply, the dream of homeownership is becoming increasingly elusive. As the housing market navigates these challenges, one thing is clear: it’s becoming more difficult for people to find affordable housing options.
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