The average interest rate for a 30-year mortgage jumped back above the 7% threshold on Monday, with the increase coming after Moody’s downgraded the U.S. credit rating on Friday over concerns about the government’s growing debt levels.
It’s the first time since April 11 that the average 30-year mortgage rate has jumped above 7%, according to Mortgage News Daily, which covers the home loan industry. The rate eased slightly later in the day, settling in at about 6.99%, the trade publication’s data shows.
Despite the Federal Reserve’s interest rate cuts last year, mortgage rates have remained near their 25-year peak because they tend to track the 10-year Treasury bond, which is sensitive to economic conditions. With Moody’s downgrade on Friday, the markets slipped in early trading and the yield on the 10-year Treasury jumped above 5%, the highest since late 2023.
Stock and bond prices trimmed their losses as the day progressed, with the S&P 500 reversing from a loss of 1.1% to a modest gain of 0.2%.
Because the nation’s debt issues are so well known already, investors have likely already accounted for them, according to Brian Rehling, head of global fixed income strategy and other analysts at Wells Fargo Investment Institute. The advisory firm expects “limited additional market impact” following the initial reactions to the Moody’s move.
By contrast, elevated mortgage rates are likely to persist, while aspiring homebuyers also face a shortage of affordable properties. Home prices remain near record highs, while higher borrowing costs add to the cost of financing a home.
Only about 1 in 5 listed homes in March were affordable for households with $75,000 in annual income, compared with about half of all listings before the pandemic, according to a recent analysis of property listings from the National Association of Realtors (NAR).
Home buying activity tends to pick up when mortgage rates drift below 6.7%, Nadia Evangelou, senior economist and director of real estate research at NAR, told CBS MoneyWatch last week.
