Rise in Mortgage Rate to 7.22% Following Robust Economic Data
The popular 30-year fixed mortgage rate reached 7.22% last Thursday, as reported by Mortgage News Daily. This represents the highest level since early November. Mortgage rates tend to follow the yield on the 10-year Treasury, which rose significantly after a stronger-than-expected employment report from ADP.
The increase in rates began last week after Federal Reserve Chairman Jerome Powell hinted that the central bank might continue raising interest rates following a pause in June. Powell emphasized that the central bank still has work to do to bring inflation back to its 2% target. The next interest rate decision is scheduled for July 26.
In the past week alone, the 30-year fixed mortgage rate has climbed 31 basis points. For individuals seeking a $400,000 mortgage, the monthly principal and interest payment rose from $2,637 to $2,720 in just one week.
Higher mortgage rates have had an impact on sellers as well, creating a “golden handcuff” effect. The majority of homeowners currently hold mortgages with rates below 4% or even below 3% due to record lows during the Covid pandemic. As a result, many homeowners are reluctant to move and give up their low rates to purchase at higher rates.
Recent data shows that nearly 82% of home shoppers feel confined by their existing low-rate mortgages, while approximately 1 in 7 homeowners without a selling plan attribute their decision to remain on the sidelines to their current low rates, according to Realtor.com economist Jiayi Xu.
This situation has led to a critical shortage of homes for sale, with new listings this year lagging 20% behind last year’s pace.