Article Summary
The average interest rate for a 30-year mortgage surpassed 7% again on Monday, following Moody’s downgrade of the U.S. credit rating due to concerns about rising debt levels. This increase in mortgage rate is the first since April, and it’s expected to persist. Aspiring homebuyers face higher borrowing costs and a shortage of affordable properties, as home prices remain near record highs. Only 20% of listed homes in March were affordable for households with $75,000 in annual income, compared to about half before the pandemic.
What This Means for You
- Be prepared for higher mortgage rates if you’re planning to buy a home, as the average 30-year mortgage rate has surpassed 7% again.
- Anticipate increased home financing costs due to elevated mortgage rates and high home prices.
- Act fast if you’re in the housing market, as the shortage of affordable properties might lead to a more competitive market.
- Stay informed about potential future credit rating downgrades, as these can impact mortgage rates and overall economic conditions.
Original Post
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.
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%.
However, 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%.
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).
Key Terms
- Mortgage rates
- Credit rating
- U.S. debt levels
- Home financing
- Affordable properties
- Home prices
- Housing market
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