US mortgage rates hit 23-year high

Economists have warned of a “dire” situation on the housing market  

American home loan rates have surged to their highest level in more than two decades, moving close to 8% this week after the Federal Reserve’s aggressive campaign to hike interest rates.     

The average 30-year fixed mortgage rate hit 7.49% on Tuesday for the first time since late 2000, putting a strain on the post-Covid housing market, data from Mortgage News Daily revealed.  

Home-purchase applications fell for a sixth week to the lowest level since 1995, as rising costs placed homeownership increasingly out of reach for many Americans, according to the Mortgage Bankers Association.     

“As time goes on and people have to roll out of those 30-year loans that they have, I think we’re going to see the effects in housing are going to be dire, but it’s going to take longer this time than before,” TJM Institutional Services managing director James Iuorio told Fox Business.     

Yields on the 10-year US Treasury bond, which influences mortgage rates and other forms of borrowing, are perched around 16-year highs as traders increasingly expect higher rates for longer.     

READ MORE: British rents skyrocketing

Most US officials still anticipate significant upside risks to inflation which could require further rate hikes, according to Bloomberg. With rising borrowing costs, mortgage rates will remain elevated and will add more pressure to the residential housing market, the outlet said.     

Home sales slumped in July as owners locked into lower-interest mortgages shied away from selling. Sales of previously owned homes were down 16.6% compared to July 2022, according to data from the National Association of Realtors.     

US mortgage rates reached their highest point in history in 1981, when the annual average stood at 16.63%.

Find more stories on economy and finance in TROIB business