US Mortgage Rates Soar to 23-Year High at 7.5%

US Mortgage Rates Reach 7.5%, Highest in 23 Years Amidst Soaring Long-Term Rates

In a startling development, mortgage rates in the United States have surged to a staggering 7.5%, marking the highest level in 23 years.

Historically, fixed mortgage rates have been a staple in the US due to global financial crises' aftermath.

The fixed-rate for a 30-year mortgage in the US has reached 7.48%, nearly the highest level in nearly 23 years since November 2000. The spike in mortgage rates is attributed to the simultaneous surge in long-term market rates.

The benchmark 10-year US Treasury yield, a global long-term market rate indicator, shot up to 4.354% during the day. This is the highest level since the global financial crisis in November 2007. A combination of the Federal Reserve's potential for additional tightening, robust US economic growth surpassing potential growth rates, and concerns over escalating deficits has collectively driven up bond yields.

Matthew Graham, Chief Operating Officer of MND, commented, "Investors aren't seeing the economic deterioration they had anticipated," adding that "rates won't change until various indicators deteriorate enough to spark Fed rate cut discussions." This suggests that unless economic indicators weaken to pressure the Federal Reserve for rate cuts, mortgage rates will remain elevated.

The ongoing surge in housing prices is expected to continue. Existing homeowners have secured mortgage loans at around 3% interest rates, making it unlikely for them to relinquish their homes for the high mid-7% interest rates. Unless there are significant reasons to sell, housing supply could diminish across the market.

In fact, according to the S&P CoreLogic Case-Shiller Home Price Index, home prices continued to climb, rising by 0.7% compared to the previous month in May. The index has increased for four consecutive months due to supply-demand imbalances.