Mortgage rates have hit their highest point in a full year, reaching 6.81% for a 30-year fixed loan. The Mortgage Bankers Association reported this figure on Wednesday, noting a direct connection to a recent sell-off in the bond market. Federal Reserve chairman Kevin Warsh provided limited clarity on future rate plans, which prompted investors to move bond yields higher.
This rise in borrowing costs is having a clear impact on the housing market. Mortgage applications dropped 2.9% last week, with refinancing activity suffering the most significant decline. Potential homeowners and those looking to refinance are responding to these costs by pulling back from the market.
There are signs of slight stabilization as of this week. Bond yields and mortgage rates have drifted down slightly following a de-escalation in the Iran conflict. Recent data shows the 30-year rate sits closer to 6.75% as of Tuesday.
While rates are elevated, the gap between the 10-year Treasury yield and retail mortgage rates remains smaller than it was in 2023. This spread currently sits around 2 percentage points. Homebuyers continue to watch these daily fluctuations closely as they weigh the cost of entry.