US mortgage rates rise to highest since March, slowing demand

US mortgage rates rose to a more than two-month high, reducing home purchase and refinance activity.

The contract rate on a 30-year fixed mortgage increased 12 basis points to 6.69 per cent, according to Mortgage Bankers Association (MBA) data out on Wednesday (May 24). The index of applications for home purchases fell 4.3 per cent in the week ended May 19 to the lowest level since early March.

Mortgage rates have been climbing in recent weeks alongside the yield on the 10-year Treasury note as negotiations over raising the US debt ceiling remain at an impasse. High borrowing costs have given homeowners little incentive to list their properties and move, pushing more prospective buyers to new construction.

The MBA’s index of refinancing applications also declined, falling 5.4 per cent from the prior week – also to the lowest level in more than two months. That contributed to a 4.6 per cent drop in the overall measure of mortgage applications.

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