The average rate on the popular 30-year fixed mortgage rate hit 8% Wednesday morning, according to Mortgage News Daily. That is the highest level since mid-2000.
The milestone came as bond yields soar to levels not seen since 2007. Mortgage rates follow loosely the yield on the 10-year U.S. Treasury
Rates rose sharply this week and last week, as investors digest more reads on the economy. On Wednesday, it was housing starts, which rose in September, though not as much as expected, according to the U.S. Census Bureau.
Building permits, an indicator of future construction, fell, but by a less than the expected amount. Last week, retail sales came in far higher than expected, creating more uncertainty over the Federal Reserve’s long-term plan.
These higher rates have caused mortgage demand to plummet, as applications fell nearly 7% last week from the previous week, according to the Mortgage Bankers Association.
The homebuilders are using buydowns to help customers afford their homes. They do this through their mortgage subsidiaries.
While they had used the financing tool very sparingly in the past, it is now the top incentive among builders, according to industry sources.
The average rate on the 30-year fixed was as low as 3% just two years ago. To put it in perspective, a buyer purchasing a $400,000 home with a 20% down payment would have a monthly payment today of nearly $1,000 more than it would have been two years ago.
10-year Treasury yield breaks above 4.9% for the first time since 2007
U.S. Treasury yields rose on Wednesday with the 10-year hitting a fresh multiyear high as investors digested the latest economic data and considered the outlook for Federal Reserve interest rates.
The 10-year Treasury yield gained around 6 basis points to 4.908%, rising above 4.9% for the first time since 2007. Meanwhile, the 2-year Treasury yield was around flat at 5.22%, near levels last seen in 2006.
Also notably, the 5-year Treasury moved as high as 4.937%, its top level since 2007.
Yields and prices move in opposite directions and one basis point equals 0.01%.
Housing starts accelerated in September, but rose as a slower-than-expected rate, according to data released Wednesday. Building permits fell in the month, but lost less than economists anticipated.
(source:CNBC)
