US mortgage rates jumped the most in four years as an accelerating sell-off in the government bond market deals a fresh blow to the housing market just weeks ahead of midterm elections. The 30-year fixed-rate mortgage averaged 7.28 per cent as of October 1, an increase of 0.25 percentage points from a week ago, Freddie Mac said on Thursday. The quarter-point jump was the biggest since October 2022, coming weeks after the Federal Reserve lifted interest rates by 0.75 percentage points as it sought to tame the highest level of inflation in more than four decades.
US mortgage rates are at their highest level since late 2023, propelled by expectations that the central bank will need to continue raising interest rates in order to stamp out a bout of inflation that has been exacerbated by Donald Trump’s Iran war and a surge in AI-related spending. The rise comes weeks before crucial midterm elections that will determine which party controls Congress at a time when polls show Americans are increasingly concerned about the spiralling cost of living.
The latest rise in mortgage rates has accompanied a sell-off in the US government bond market, which resulted in Treasuries chalking up their worst monthly performance in four years during September. Rising mortgage rates have piled pressure on the housing sector, with prospective buyers deterred by elevated borrowing costs and record-high house prices, according to the Case-Shiller home price index. KB Home, one of the US’s biggest listed homebuilders, last week reported a 20 per cent year-on-year decrease in third-quarter revenue and a 19 per cent drop in homes delivered.
Jeffrey Mezger, executive chair, said: “Higher mortgage interest rates have further pressured affordability and, together with geopolitical uncertainty and broader economic headwinds, have caused many prospective buyers to be more cautious on purchasing a home.” Lennar Corporation, the second-biggest home builder in the US by volume, last month pinned year-on-year declines in third-quarter revenue, new orders and adjusted earnings on deteriorating buyer affordability.
Source: Financial Times Companies · Summarized by HeadlinesBriefing