Business

Daily mortgage rates reach highest level since November

by Adam Barnes - 05/25/23 6:05 PM ET

A development of new homes in Eagleville, Pa., is shown on Friday, April 28, 2023. The Federal Reserve's rate hikes have led to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing, and have heightened the risk of a recession. (AP Photo/Matt Rourke) — A development of new homes in Eagleville, Pa., is shown on Friday, April 28, 2023. The Federal Reserve’s rate hikes have led to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing, and have heightened the risk of a recession. (AP Photo/Matt Rourke)

Daily mortgage rates reached their highest level since November, and the weekly average sent monthly payments for prospective buyers to an all-time high, according to a new report.

The 30-year average rates reached 7.12 percent on Thursday while the weekly data shows the benchmark rate at 6.57 percent. The latter pushed monthly payments for the typical homebuyer to $2,614, the report from real estate brokerage Redfin shows.

Redfin Economics Research Lead Chen Zhao explained the way investors are reacting to a potential U.S. debt default is driving the rising rates.

“Mortgage rates have increased over the past two weeks because it looks more likely that the U.S. government will avoid hitting the debt ceiling,” Zhao said in a news release.

“That may seem counterintuitive, but optimism is driving rates up because an economic crisis would lead to the Fed lowering rates as they try to prevent a recession,” Zhao continued. “Financial markets felt the risk of default was unusually high for the last month or so, which caused rates to stay lower than they otherwise would have been.”

Zhao said rates are also moving up now that lawmakers are negotiating a deal.

Freddie Mac data shows that mortgage rates have ticked up slowly over the last month, jumping to 6.57 today from 6.39 percent last week.

An Freddie Mac Chief Economist Sam Khater said in a statement the high rates are due largely to a resilient economy and concerns over the debt ceiling.

These high rates continue to hamper affordability at a time when the nation’s housing stock is in short supply.

“Dampened affordability remains an issue for interested homebuyers and homeowners seem unwilling to lose their low rate and put their home on the market,” Khater said.

“If this predicament continues to limit supply, it could open up an opportunity for builders to help address the country’s housing shortage,” he added.

New single-family home sales increased 4.1 percent from March to April and were up by 11.8 percent from a year ago, according to data released by the Census Bureau on Tuesday. Sales were at a seasonally adjusted annual rate of 683,000 units, up from a revised 656,000 in March.