Mortgage rates jump above 7%

Mortgage rates rose above 7% for the first time this year, crossing a symbolically c oncerning threshold that threatens to keep millions o f potential homebuyers and sellers on the s idelines of a U. S. housing market that is increasingly s howing s igns o f slowing.

The average rate o n 30- year mortgages, the most popular home loan in the United States, rose t o 7.1% t his week, Freddie Mac reported Thursday, the highest since November. Mortgage rates reached a recent high of nearly 8% l ate last year — a level not seen since 2000.

As mortgage rates have r isen in recent months, making homeownership costlier f or b uyers, potential sellers who may feel locked into lower rates on their existing loans have been keeping their houses off the market, in effect pushing prices higher, too.

Combined, the forces have fed into a broader feeling of frustration about the economy, at a time when inflation has remained hotter than expected.

“Potential h omebuyers are deciding whether t o buy before rates rise even more, or hold off in hopes of decreases later in the year,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

“It remains unclear how many homebuyers c an w ithstand i ncreasing rates in the future.”

At t he s ame time, the market has slowed. Sales of existing homes fell by 4.3% in March and 3.7% from a year earlier, according to the National Association of Realtors.

In April 2021, mortgage rates were at about 3%, less than half the current rate.

They began to climb that year and continued to r ise in 2 022 when the Federal Reserve started raising its benchmark rate in an effort to combat inflation.

Although inflation h as s ince cooled significantly, i t’s still above the central bank’s 2 % target.

The Fed has signaled i n recent months that it may keep the cost of borrowing higher for longer amid stubborn inflation. The Fed’s benchmark interest rate is currently the highest it’s been in 22 years.

Mortgage l enders g enerally watch the 10- year Treasury bond, which is tied to mortgage rates, and expectations that the Fed will keep rates high has pushed up Treasury yields. The 10- year Treasury yield has soared since the start of the year, now sitting at about 4.6%.

The NAR agreed to settle litigation last month that would eliminate the standard sales commission, a move housing experts say could bring down home prices.

Sellers currently pay a 5 % or 6% commission t o a real e state agent, a cost that’s typically passed on to the buyer through a higher sticker price.