Mortgage rates surge to highest level since July
Increasing concerns about the course of the war with Iran cause bond yields to increase and mortgage interest rates to increase accordingly.
The average rate on a 30-year fixed loan rose 7 basis points to 6.75% on Tuesday, according to Mortgage News Daily. This is the highest level since July 31. Rates are now up 33 basis points in the last 10 days alone and are 46 basis points higher than the April low of 6.29%.
This decline in April followed a sharp rise in rates at the beginning of the war; The rate increased from 5.99% at the beginning of March to 6.64% at the end of the month.
“Bonds are telling politicians to get serious about ending the war or face increasingly dire consequences,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
The move from 5.99 percent to now 6.75 percent is a meaningful change in the math of housing affordability. The monthly principal and interest payment for a buyer with a 20 percent down payment on a $420,000 home (roughly the national average home price) increased from $2,012 to $2,179; That’s a difference of $167.
The country’s homebuilders are slightly less sensitive to rate movements as they lower mortgage rates to get buyers in the door. Rates are still lower than they were a year ago, when they were above 7%.
“Prices are a challenge,” UBS homebuilding analyst John Lovallo said in an interview on CNBC’s “Squawk on the Street” on Tuesday. “But we’re still at levels where builders can operate effectively. As quickly as rates are rising, if this war reaches some sort of resolution and oil retreats, rates could fall just as quickly.”
Lovallo sees this as a buying opportunity for builder stocks, noting that homebuilders are still seeing average order growth throughout the spring season.
“Housing demand remains strong,” he added.
Pending home sales rose in April both month over month and compared to a year ago, according to a report released Tuesday by the National Association of Realtors.
“Despite increasing economic uncertainty and a slight increase in mortgage rates, buyers are coming in with cautious optimism,” Lawrence Yun, chief economist for realtors, said in a statement. “Demand will easily be even higher once mortgage rates return to the levels they were at earlier this year.”
