US mortgages: interest rates at 15-year highs

The FED's interest rate policy pushes up mortgage costs in the USA. In the week ending May 19, 2023, the average contractual interest rate for 30-year fixed-rate mortgage loans with a conforming loan balance ($726,200 or less) in the United States jumped 12 basis points to 6.69%. , hitting its highest level since early March, and beyond. Mortgage rates have risen in recent weeks, mirroring the upward trend in 10-year Treasury yields, as discussions about raising the US debt ceiling continue to stall.

It has been 15 years since mortgage interest rates have reached these levels, and this will be felt abundantly in the US housing market.

Mortgage rates play a significant role in the housing market and can have a major impact on the demand for and affordability of buying real estate.

• Affordability: Lower mortgage rates make home ownership more affordable by reducing the cost of borrowing. When rates are low, buyers can benefit from larger loans or lower monthly payments, increasing their purchasing power. This can stimulate housing demand and drive up prices.
• Housing Demand: Lower mortgage rates generally stimulate housing demand as they attract more potential buyers to the market. When rates are favourable, they can incentivize renters to become homeowners, increasing the pool of potential buyers. Conversely, rising mortgage rates may curb demand as loans become more expensive, potentially slowing down the housing market.
• Refinancing Activity: Mortgage rates also affect refinancing activity. When rates are low, homeowners may choose to refinance their existing mortgages to get a lower rate, reduce their monthly payments, or shorten the loan term. This can free up disposable income, increase consumer spending and potentially stimulate the economy.
• Market Stability: Mortgage rates can have an impact on market stability as they affect the stability of borrowers' mortgage payments. Higher rates can strain the affordability of some homeowners, leading to an increase in delinquencies and foreclosures. Conversely, lower rates can help homeowners maintain financial stability and reduce the risk of default.
• Investment activity: Mortgage rates can influence real estate investment decisions. When rates are low, investors may be more inclined to buy properties for rent or for development. Reducing financing costs can increase investment returns and make real estate investing more attractive.

It is important to note that other factors, such as economic conditions, occupancy rates and housing supply, also play crucial roles in determining the housing market. Mortgage rates are only one piece of the puzzle, but they can have a significant impact on housing affordability, demand and overall market dynamics.

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The article US mortgages: interest rates at 15-year highs comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/tassi-di-interessi-sui-mutui-usa-al-massimo/ on Wed, 24 May 2023 19:33:37 +0000.