Mortgage rates jump above 7% after Moody’s downgrade

TEXAS – MarketWatch reports that mortgage rates surged after the credit-rating agency Moody’s downgraded U.S. debt. Moody’s cut the U.S.’s sovereign credit rating from AAA to Aa1. It was the last of the major credit-rating firms to strip the country of its triple-A rating. S&P Global Ratings downgraded U.S. debt in the summer of 2011. The downgrade of debt put upward pressure on bond prices on Monday morning. That pushed the 30-year fixed-rate mortgage up 12 basis points to 7.04%, according to Mortgage News Daily. It later settled at 6.99% later in the day. Moody’s cited an increase in government debt and interest-payment ratios that were significantly higher than similarly rated sovereigns as reasons for its decision.

Mortgage rates tend to move in tandem with Treasury yields. With the 10-year yield going up, the 30-year fixed mortgage rate was going to trend upward as well, Jake Krimmel, a senior economist at Realtor.com, told MarketWatch. (Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch publisher Dow Jones is also a subsidiary of News Corp.) Mortgage rates going up is “really not ideal for prospective buyers,” Krimmel added. The housing market, meanwhile, is mired in a crisis of affordability. Elevated mortgage rates and record-high home prices have put homeownership out of reach for many Americans, as demonstrated in the chart below. Home sales plummeted to a 30-year low in 2024. Even though the spring season is typically the busiest time of the year for the residential real-estate market, buying and selling have remained “sluggish,” Lawrence Yun, chief economist at the National Association of Realtors, said of home sales through March.