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Mortgage rates rose again this week after the US lost its last top credit rating and jittery investors dumped their Treasury holdings, sending yields higher.
The average 30-year mortgage rate was 6.86% through Wednesday, up from 6.81% a week earlier. The average 15-year mortgage rate was 6.01%, from 5.92%.
10-year Treasury yields, which mortgage rates closely track, moved sharply higher in recent days after Moody’s Ratings downgraded the country’s debt rating to a step below the top Aaa rank, citing a history of large fiscal deficits and growing interest costs with little evidence that new fiscal proposals would change the trajectory.
“Concerns about tariffs and the growing US debt burden have raised doubts about whether US Treasurys remain a safe-haven asset,” Realtor.com economist Jiayi Xu said in a statement. “As a result, yields rose as investors reassessed the risk of holding US debt. … This upward pressure has translated into increased borrowing costs for homebuyers, which means higher mortgage rates.”
The movement has pushed average mortgage rates over 7% for some buyers in recent days. Mortgage News Daily pegged the average 30-year-fixed rate at 7.08% on Wednesday.
The Moody’s action was largely symbolic — Fitch Ratings and S&P Global Ratings downgraded the US years earlier, and Moody’s had been considering the move since 2023. Today, the US’s debt rating is Aa1, the second-highest rank on the 21-notch Moody’s scale. Still, the move jolted bond markets.
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US government bond yields have risen across the board in recent days, with the 10-year Treasury yielding 4.56% as of Thursday, up from around 4.43% before the downgrade. Just as dip buyers began to step in, a weak auction for 20-year Treasurys on Wednesday stoked fresh fears about demand for longer-dated US government debt and pushed yields higher again.
Mortgage demand continues to be weak as rates rise. Applications to purchase a new home were down 5% through Friday compared to a week earlier, according to the Mortgage Bankers Association, and refinancing applications were also down 5%.
As relatively high rates kept buyers cautious, existing home sales also slipped in April, according to the National Association of Realtors. Sales dropped 2% from a year ago and 0.5% from March, to a seasonally adjusted annual rate of 4 million home sales. Homes that sold in April likely went under contract a month or two earlier, suggesting a weak start to the traditionally busy spring homebuying season.
