US mortgage rates hit near seven-month high during debt impasse

US mortgage rates surged to the highest level since early November last week when debt-ceiling talks were still at an impasse, stifling demand for home purchases and refinancings.

The contract rate on a 30-year fixed mortgage increased 22 basis points to 6.91 per cent, according to Mortgage Bankers Association (MBA) data out on Wednesday (May 31). That was through the week ended May 26, before the White House and Republican negotiators struck an agreement to raise the debt ceiling that’s now pending congressional approval.

Since then, Treasury yields have been falling as traders grow hopeful that lawmakers will finalise a deal and avert a US default. If sustained, that could lower mortgage rates come next week.

The index for home purchases fell to the lowest level since early March. Refinancing activity was the weakest since late February, the MBA data showed.

The survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75 per cent of all retail residential mortgage applications in the US. BLOOMBERG