Barron's
Mortgage rates are likely headed closer to 7% after Moody's downgrade of U.S. debt. It's more bad news for home buyers, builders, and the U.S. housing market's busy season.
The 10-year Treasury yield rose 0.059 percentage point to 4.496% on Monday, according to Dow Jones Market Data. Home financing costs will likely follow, with movements in the 10-year Treasury yield often echoed by 30-year mortgage rates. Gains result in more expensive home financing costs, while declines translate into savings for buyers.
"The Moody's downgrade of the U.S. Treasury obligations put a damper on and caution about putting money into what had previously been the safest asset in the world," National Association of REALTORS® chief economist Lawrence Yun says. "Given that mortgage rates follow the path of the Treasury yields, home financing will get difficult."
There is reason to think the rise in rates wouldn't last longer than a couple of weeks at most, Yun notes. "The overall consumer inflation rate has been calming down, and further decline in the shelter component of inflation will help to keep inflation controlled," he said.
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