Mortgage rates in the US have reached 7.16%, the highest level since 2001.

Mortgage rates in the US have reached 7.16%, the highest level since 2001. The average interest in the most popular US home loan rose, according to data from the Mortgage Bankers Association (MBA). 

Reuters reported: “The average contract rate on a 30-year fixed-rate mortgage rose by 22 basis points to 7.16% for the week ended Oct. 21 while the MBA's Market Composite Index, a measure of mortgage loan application volume, fell 1.7% from a week earlier. Mortgage application activity is at its slowest pace since 1997.” 

The increase on the 30-year rate increased to 6.7% last week up from 6.29%. Last year, the rate stood at 3.01%.

Mortgage rates have more than doubled since the beginning of 2022. The Federal Reserve has pursued aggressive interest rake hikes to combat a high inflation rate. Last week, the Federal Reserve hiked its benchmark borrowing rate by another three-quarters of a point, the fifth increase this year and third consecutive 0.75 percentage point increase. 

Officials forecast that they will further raise the benchmark rate approximately 4.4% by the end of the year, a full point higher than they predicted back in June. They also expect to raise the rate again in 2023 to around 4.6%, which would be the highest level since 2007.

Home sales have been in decline in the US for seven months. The US faces fears of a global recession, with financial pressures mounting alongside other G7 nations. The housing market slump has benefited the pound, as the value of the sterling surged 1.86pc higher to the dollar at $1.1487. The euro has also benefited, rising 1pc against the dollar to 0.9969.

Canada has also benefited against a weaker dollar. Canada’s stock index rose on 25 October to its highest closing level in nearly three weeks. The Toronto Stock Exchange's S&P/TSX composite index ended up 178.61 points, or 0.9%, at 19,097.91, its third straight day of gains and its highest closing level since 5 October. But Reuters reports that money markets expect the Bank of Canada to raise interest rates by three-quarters of a percentage point on Wednesday to a 14-year high of 4%.

The housing slump, higher interest rates and financial pressures will surely weigh on voter’s minds next month as US midterm elections begin. The Democrats’ narrow control over the Chamber is on uncertain grounds. A two day national opinion poll by Reuters/Ipsos found that 39% of Americans approve of Biden's job performance, a percentage point lower than a week earlier. This dip in the President’s approval rating edges close to the lowest level of his tenure so far. In the poll, one third of respondents picked the economy as the country's biggest problem, a much larger share than the one in 10 who picked crime. 

The online poll gathered responses from 1,005 adults, including 447 Democrats and 369 Republicans. It has a credibility interval - a measure of precision - of four percentage points. This decline in popularity could sway the midterm elections on 8 November. If the Republican party gained control of even one chamber of Congress, it would pose many difficulties for Biden’s legislative agenda. 

(Sources: Reuters, The Telegraph, The Guardian)