According to a Freddie Mac primary mortgage market report, mortgage rates in the United States once again reached their highest level, placing the 30-year reference rate at 6.66% from 6.58% last week. This, coupled with high real estate prices due to a lack of inventory, could mark a big pause in the sector, both for homeowners and future buyers.
For its part, Freddie Mac's analysis also highlights that the 15-year fixed reference interest rate also rose from 5.96% to 6.04%, amid renewed tensions between the United States and Iran and the recent decision by the Federal Reserve to keep interest rates unchanged, which has fueled concerns about inflation for the coming months.
Although mortgage rates are not governed or directly affected by the Fed's decisions, mortgage rates closely track the yield on 10-year Treasury bonds, which have remained elevated due to both the conflict in the Middle East and the Federal Reserve's hold on interest rates.
While economists like Sam Khater, head of Freddie Mac, remain optimistic about the market, noting that the sector “continues to benefit from increased housing supply, which provides potential buyers with additional options and helps maintain buyer activity as mortgage interest rates fluctuate,” he said.
Other market specialists, such as Anthony Smith, senior economist at Realtor.com, consider that "potential buyers, especially first-time buyers who tend to have larger loans, are the most exposed to each increase in borrowing costs, while homeowners with rates below 4% have little reason to put their properties up for sale and exchange them for those in the current market. That lock-in situation continues to limit supply, even as sellers who do list their properties for sale raise their prices to sell quickly," he pointed out.
For her part, Kate Wood, lending expert at NerdWallet, expresses concern about inflation and how this will continue to affect the market: "While it is not clear if or when central banks will raise the benchmark interest rate, there is great concern about inflation getting out of control. Between that and the situation with Iran, we are seeing Treasury yields skyrocketing, and mortgage rates are rising at the same pace," she added.
In this regard, Smith mentioned that since the Federal Reserve has signaled that its next move is likely to be a rate hike rather than a rate cut, any relief in short-term rates is unlikely. “As oil remains the main channel through which the conflict with Iran fuels inflation, a de-escalation and reopening of the Strait of Hormuz remains the clearest path to lower interest rates,” he said.
