Mortgage Rates Surge to 7.1%: Implications for the Housing Market
As of Friday, the average rate for a 30-year fixed mortgage has increased to 7.1%, marking a rise of 13 basis points and representing the highest level observed since mid-February, according to Mortgage News Daily.
Market Volatility and Bond Yields
The fluctuations in mortgage rates this week can be attributed to volatile bond yields. The initial spike in yields earlier in the week was a direct response to newly enacted tariffs by President Donald Trump affecting several countries. However, yields dropped shortly after when Trump revised many tariff rates. Notably, tariffs on Chinese imports remain at a staggering 145%.
Despite a lower than anticipated inflation report released on the same day, bonds experienced another sell-off on Friday. This trend reflects a loose relationship, where mortgage rates mirror movements in the 10-year Treasury yield.
Historic Context of Current Yield Trends
Matthew Graham, the Chief Operating Officer of Mortgage News Daily, emphasized the significance of this week’s bond market performance by stating, “There have been some bad weeks for bonds here and there over the careers of most anyone who’s alive to read these words, but unless your career began before 1981, you just lived through the worst week you’ve ever seen in terms of the jump in 10-year yields.”
He offers two perspectives on the current bond trading scenario: viewing it as either the conclusion of the worst week for 10-year yields since 1981 or simply a phase in a normal trend observed over the past year and a half.
Consumer Sentiment and Economic Indicators
Recent economic indicators also highlight consumer concerns. An upcoming report on consumer sentiment showed dramatically lower expectations, with inflation forecasts climbing from 5% in March to 6.7% in April—the highest since 1981.
This economic backdrop coincides with the critical spring housing market, a time when many consumers consider purchasing a home, their largest single investment.
Future Implications for Housing Market
Nancy Lazar, Chief Global Economist at Piper Sandler, provided a somber outlook during an appearance on CNBC’s “The Exchange,” stating, “Forget about housing in this environment, with mortgage rates back up, consumers certainly concerned about the job market, housing will also be on the weak side.”