US Mortgage Rates Approach 7% Annual Rate... 'Psychological Resistance Level' Reached

US mortgage rates are nearing a 7% annual rate, causing further cooling of home-buying sentiment. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage was 6.76% last week. Mortgage News Daily's daily tracking shows rates have already surpassed 7%.

The rise follows the US 10-year Treasury yield breaking above 5%, which has become a benchmark for various loan rates. Mortgage rates, which were in the low 5% range as recently as February, surged after the Iran war outbreak and have continued to climb due to persistent inflation and government fiscal deficits driving increased Treasury selling.

As mortgage rates approach the psychological resistance level of 7%, home-buying sentiment has begun to weaken. The National Association of Realtors reports August existing home sales fell 2% month-over-month to 3.98 million units (annualized), the lowest since June 2023. Buyers who purchased homes in February versus those buying now face tens of thousands of dollars more in interest payments over 30 years, according to Michael Pratantonio, chief economist at the Mortgage Bankers Association.

With home prices at all-time highs, potential buyers are adopting a wait-and-see approach. Zillow economist Kara Yung noted that sellers are increasingly withdrawing listings and planning to relist later as demand weakens. Industry experts suggest high mortgage rates may become the new normal.