Mortgage rates may climb above 7%, economists say
Economists warn that rising bond yields could push 30-year mortgage rates past 7%, as inflation and debt concerns weigh on the market.
Mortgage rates have risen to 6.71% for a 30-year fixed loan, the highest level in 13 months, and analysts say the upward trend could continue. Mark Zandi, chief economist at Moody's Analytics, told CBS News that the market is "effectively there" and rates could easily exceed 7%.
The increase follows a broader sell-off in the bond market, driven by heightened inflation worries tied to rising energy costs and expanding U.S. government debt. The 10-year Treasury yield has climbed from 4.08% to 4.77% over six months, raising borrowing costs for mortgages, auto loans and credit cards.
With inflation still above the Federal Reserve’s 2% target, traders anticipate a possible rate hike later this month, the first since July 2023, according to CME FedWatch. The upcoming Consumer Price Index report from the Labor Department will be closely watched.
Zandi described the bond market as "very fragile" globally and warned that further pressure could push mortgage rates above 7%, keeping the housing market subdued for an extended period. Lending expert Kate Wood of NerdWallet noted that about half of the lender quotes she reviewed already exceed that level, and borrowers are likely seeing "sevens" in current offers.
Realtor.com senior economist Jake Krimmel said mortgage costs are expected to stay high, adding that rates may rise before they fall. While higher rates increase home-buying costs, Wood suggested they could also reduce competition for homes, potentially easing price pressures.