US homebuyers face fresh pressure as mortgage rates climb to 9-month high

Rising mortgage rates are adding to pressure on the US housing market, with the average long-term home loan rate climbing to its highest level in nine months and further weakening affordability for buyers, AP reported.Freddie Mac said on Thursday that the average rate on a 30-year fixed mortgage rose to 6.53 per cent from 6.51 per cent last week. The rate was 6.89 per cent a year ago.The increase comes as higher oil prices and inflation concerns continue to push up borrowing costs across the US economy.Mortgage rates have largely moved higher since the conflict involving Iran disrupted oil flows through the Persian Gulf, lifting global crude prices and influencing bond yields.The average rate on a 15-year fixed mortgage, commonly used for refinancing, also increased to 5.87 per cent from 5.85 per cent last week, according to Freddie Mac.Higher mortgage rates have started affecting housing demand during the spring homebuying season.Sales of previously occupied homes remained mostly flat last month after declining year-on-year in the first quarter, continuing a broader slowdown in the housing market that began in 2022 as borrowing costs rose sharply.New home sales also weakened. Data from the US Census Bureau showed sales of newly built homes fell 6.2 per cent in April to a seasonally adjusted annual rate of 622,000 units.Mortgage application data also pointed to softer demand.The Mortgage Bankers Association said total mortgage applications fell 8.5 per cent last week as rates moved higher, with refinancing activity accounting for a large part of the decline.At the same time, applications for loans to purchase homes continued to run ahead of last year’s levels.Economists said homebuyers are seeing more options in the market, but elevated borrowing costs are limiting affordability gains from softer home prices.“Buyers have more homes to choose from and asking prices continue to soften, but their dollars don’t stretch as far as they did a few months back,” said Jake Krimmel, senior economist at Realtor.com."A resolution to the (US-Iran) conflict, therefore, would do a world of good for mortgage rates, consumers, and housing market momentum,” he added.