After Treasury yields rose in recent days in response to some favorable reports on the labor market, service sector and factory orders, mortgage rates did the same. As reports continue to emerge that show the economy may be beginning a modest recovery, suddenly there appears to be upward pressure on bond yields, and thus mortgage rates.
It’s going to be ugly. Today is the first time since the Covid-19 market reaction settled down in March that interest rates truly have a reason to panic. Until further notice, this looks like liftoff. Things can change, but until and unless they do, you have to treat last week’s all-time low rates as the bottom of the market.
Higher Mortgage Rates Will Lower Demand For Houses
Housing demand has been red-hot among homebuyers, but that could change as rates rise.
In addition to the uptick in rates, banks and lenders have retained tight underwriting standards for home loans, pushing the average credit score above 700, which is causing younger buyers to delay their home purchase.
Ratiu added that the average credit score among buyers aged 30 to 39 is 673, disqualifying them for a mortgage with many lenders.
But even those who qualify for a mortgage may find that houses aren’t affordable for them. House prices have increased due to a lack of supply relative to demand.
Homebuyers have returned en masse to the housing market after exiting during the height of the pandemic, as evidenced by a rise in mortgage applications. But sellers haven’t.