US mortgage rates soar above 7%

Housing market faces fresh challenges

US mortgage rates soar above 7%

Mortgage rates in the United States have surged above 7% for the first time since early December, dealing a setback to the housing market’s recovery.

In the week ending February 16, the contract rate on a 30-year fixed mortgage soared by 19 basis points to reach 7.06%, based on data released Wednesday by the Mortgage Bankers Association (MBA). This uptick marks the most significant weekly increase since October, according to Bloomberg.

The MBA reported that its index of applications for home-purchase mortgages plummeted by over 10%, reaching its lowest point since November. It’s a decline that has persisted for the fourth consecutive week.

Despite a drop from their peak levels, current mortgage rates stand at more than double the rates observed in 2021. Both buyers and sellers have been eagerly awaiting the Federal Reserve’s move to initiate interest rate reductions. However, Federal Reserve officials have consistently indicated that they are not in a hurry to act. Looking ahead, the trajectory of inflation and the strength of the labor market, along with the response of central bankers, will play pivotal roles in determining the future direction of mortgage rates.

The MBA’s overall index for mortgage applications, which tracks both home purchases and refinancing, dropped by 10.6% last week to its lowest point this year. Additionally, the MBA’s index for refinancing experienced a decline.

According to Bloomberg, the MBA’s survey gathers responses from mortgage bankers, commercial banks, and thrifts and has been conducted weekly since 1990. The data collected encompasses over 75% of all retail residential mortgage applications in the US.

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