The average interest rate for a 30-year fixed loan surpassed 5 percent. Experts are now assessing what approaching six percent means for the market.
Editor-in-chief of Wolf Street, Wolf Richter says that the new rate, along with still-rising home prices, is going to continue to push affordability limits in the nation's housing market, “Affordability issues, already tough to deal with at 4 percent and 4.5 percent and even tougher to deal with at 5 percent, are going to be much tougher at 6 percent.” MarketWatch reports that hot markets like San Francisco, Denver, and Seattle are most at risk for a potential bubble than other, "less inflated" markets.
The spread between the average 30-year fixed mortgage rate and the 10-year comes in around 1.5 to 2.0 percentage points over time. The yield on the benchmark government bond has soared this month to roughly seven-year highs amid worries that increasing inflation will erode the value of fixed-income assets. “The 10-year yield has moved in two surges so far in this rate-hike cycle, each of them over 1 percentage point, with some back-tracking in between,” Richter wrote. “It appears to have launched ‘Surge 3.’ If it plays out, this surge would push the 10-year beyond 4 percent. And this would bring the 30-year fixed rate into the neighborhood of 6 percent.”
