Mortgage rates experienced a significant increase on Monday, following Moody’s recent downgrade of the U.S. credit rating. After weeks of relative stability, this rise has sent shockwaves through the housing market.
The surge in bond yields, which escalated after the late Friday announcement, has influenced mortgage rates that typically align with the yield on the 10-year Treasury bond.
Mortgage News Daily reported that the average rate for a 30-year fixed mortgage climbed to 7.04% on Monday, marking the highest level since April 11.
Matthew Graham, chief operating officer at Mortgage News Daily, commented on the situation, stating, “The average mortgage lender had to account not only for the market movement in Friday’s closing minutes, but also to the additional weakness seen this morning. That makes for a fairly big jump, day-over-day, but it does very little to change the bigger picture.”
The spike in mortgage rates has already begun to impact the housing market, as evidenced by a 3.2% decline in pending sales of existing homes in April compared to the same month last year, according to Realtor.com.
Homebuilders have also reported a sharp decrease in demand recently. The National Association of Home Builders’ monthly index indicates that homebuilder sentiment is currently at its lowest since the end of 2023.
While there was a brief uptick in mortgage demand from homebuyers during the first two weeks of May, as noted by the Mortgage Bankers Association, rates were hovering around 6.9% at that time. However, there has been a noticeable slowdown in activity as rates surpass the 7% mark, with some potential buyers being pushed out of qualifying for loans as a result of this increase.
