U.S. mortgage rates neared the 8% mark last week, an industry lobby group said Wednesday, taking home borrowing costs to a fresh 23-year high, as the bond market meltdown continues to influence consumer demand across a range of sectors.
The Mortgage Bankers Association said average 30-year fixed rates for conforming loan balances of less than $726,200 rose 20 basis point to 7.9% for the week ending on October 20, a move that takes that headline rate to the highest level since September 2000.
The MBA's seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single-family home, fell 2.2% to the lowest levels since 1995 as buyers backed away from new transactions amid the surge in borrowing costs, while new applications were down 1% on the week and 22% when compared to last year's levels.
The MBA noted, however, that its refinancing index rose 1.1%, while adjustable rate applications were up 9%, suggesting buyers might be thinking rates have peaked heading into the end of the year and beyond.
“Ten-year Treasury yields climbed higher last week, as global investors remained concerned about the prospect for higher-for-longer rates and burgeoning fiscal deficits," said Joel Kan, the MBA's vice president and deputy chief economist. “Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995."
"These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity," he added. "
Benchmark 10-year Treasury note yields, which lead the market for 30-year fixed mortgages, have risen more than a full percent since the end of the second quarter, and passed the 5% mark for the first time since 2007 earlier this month.
The moves paralleled the steepest global government bond market sell-off in a decade, triggered by a combination of higher rate signals from the Federal Reserve, record budget deficits and the specter of billions in new supply from the Treasury over the coming months.
The National Association of Homebuilders closely-tracked survey of builder confidence fell six points to a 10-month low of 40 points in October, as builders reported lower levels of buyer traffic amid the mortgage rate surge.
“Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability,” said NAHB chair Alicia Huey.
September housing starts, however, rose by a bigger-than- expected 7 from August, the Census Bureau said earlier this month, with single-family units up 3.2% to an annual rate of 933,000 amid the ongoing demand for new home construction and dearth of existing home sales.
All that said, new sales of single-family homes rose 12.3% in September, according to Commerce Department data published Wednesday, with the media sale price was down 12.3% from the same period last year to $418,800.
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