US mortgage rates highest since 2023

Bisi Adebayo (0:01)

Buying a home in America just got even more expensive.

Samira Fussain (0:05)

We're looking at some multi-year highs, records that they haven't seen in a very long time.

Joe Vacarri (0:11)

We've had to have multiple discussions with my wife and I saying, where's our budget, if interest rates go up?

Bisi Adebayo (0:16)

It's World Business Report from the BBC World Service. I am busy at DeBio. We'll find out what the highest US mortgage rates in nearly three years mean for home buyers, and as Jaguar unveils its new electric car, can it put its world controversy behind it and win over drivers?

So it's just become more expensive to buy a house in the US because mortgage rates have gone up for a seventh week in a row, with the average rate on a 30 year mortgage now close to 7.5%, which is the highest in nearly three years. So what's pushing rates up? I spoke to the BBC's US Business Correspondent, Samira Fussain.

Samira Fussain (1:01)

Bond yields, so that's how much money the government will pay you to borrow money.

Well, that's actually gone up quite a bit, and we're looking at some multi-year highs, records that they haven't seen in a very long time. And why that's important is because bond yields are kind of the indicator first in terms of market sentiment when it comes to traders and investors. And then it is also important for everyday people because what you pay for interest rates is really dependent on where those bond yields are. So you'll see a relationship between, if you see bond yields are really high, then if you look at your credit card statement, well, the interest rate on credit cards is gonna be a lot higher, or the interest rates for getting a home loan is gonna be higher, or a car loan. It has an impact on all kinds of borrowing.

Bisi Adebayo (1:58)

And speaking of impact now, you've been talking to Joe Vacarri, who's trying to buy a home with his wife.

Joe Vacarri (2:04)

We've had to have multiple discussions, my wife and I saying, where's our budget? If interest rates go up, if they come down, what can we afford? What can't we afford? And have to be just prepared for everything that might get thrown at us. And it's been more hesitation of looking at each house individually. Where is this worth?

What they want and asking? What we may have to go to on top of any renovations that may be needed on top of everything additionally? And then saying, where's the interest rate today? By the time we close, where does it go?

And we've seen it from our probably, I guess, the first start of when we started looking was at six low sixes. And now we're up above seven. So it's been interesting to see, OK, where do we where can we go? What can we afford?

Bisi Adebayo (2:46)

So Joel talks there about constantly having to work out what they can afford and what they can't afford. So is that a conversation a lot of prospective buyers are having right now?

Samira Fussain (2:58)

I think that is a conversation that a lot of prospective buyers are having. But remember that rising bond yields is not just an issue for someone who's looking to buy a home or who's looking to take out a loan.

Rising bond yields has a cascading impact right across the US economy. So for example, in Joe's case, they have been able to buy a house, because they have to pay higher interest rates, they're not going to be doing any renovations. They're going to have to hold back on any kind of renovations. So the impact is that he's not going to the hardware store, he's not buying paint, he's not hiring contractors to fix up his home. So that has an impact on construction, and then that has an impact on labor. And you can see how on and on all of this has a ripple effect across the US economy.

Bisi Adebayo (3:48)

Absolutely. And I was going to ask really, what is driving the rates up so quickly? We're talking about roughly half a percentage points in just three weeks.

Samira Fussain (3:58)

One of the issues, of course, is that the US government is holding a lot of debt right now, highest debt levels than the US has ever seen before. So that is showing that investors aren't feeling very confident. And then you also have the interest rates that set by the Federal Reserve, that's America Central Bank. Those are also creeping up, because inflation has become quite high and one of the direct results of the war with Iran. So it's all of these economic indicators that are creating a less stable environment, which has made investors a little bit more weary about the overall US economy.