US mortgage rates hit highest since August as war fans inflation

[NEW YORK] US mortgage rates surged this week to the highest level since August, threatening a spring selling season that was just starting to get a pulse.

The average rate for 30-year fixed loans jumped to 6.51 per cent from 6.36 per cent, the biggest weekly increase since the end of March, Freddie Mac reported on Thursday (May 21).

The housing market has become hostage to geopolitics, with the war in Iran driving up oil prices, inflation and bond yields. Rates on 10-year Treasuries are hovering at their highest level in about a year, while 30-year yields are not far from highs not seen since 2007.

Analysts who had anticipated interest-rate cuts by the Federal Reserve are now weighing the possibility of a hike. Even so, the market has shown stronger-than-expected resilience.

Pending home sales rose in April for a third consecutive month, the National Association of Realtors said on Tuesday. And new listings and contract signings are at the highest level since 2022, according to Realtor.com.

Compared with last spring, which turned out to be a dud, buyers at least aren’t paying the average 6.86 per cent mortgage rate seen a year ago.

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“We’ve been surprised so far that we haven’t seen deterioration like we did this time last year,” said Jake Krimmel, senior economist at Realtor.com. “May is where the rubber will meet the road because that’s when things tend to really start picking up.” BLOOMBERG