Lawrence Summers, the former Secretary of Treasury under the Clinton administration, has warned that home mortgage rates are set to climb even higher.
This is the mortgage’s highest interest rate since mid-2008. The rise of mortgage rates had briefly paused in August, but since have climbed by more than a percentage point in the past six weeks.
“Similarly, purchase activity was 29 percent lower than a year ago, with higher rates and economic uncertainty weighing on buyers’ decisions.”
Mortgage applications for both purchase and refinances have declined following the Federal Reserve’s “aggressive policy measures” aimed at bringing down inflation, Kan added.
US Yields, Fed Rates
On Wednesday, the benchmark 10-year U.S. Treasury yield climbed to 4 percent—its highest level in 14 years—before declining after the Bank of England announced emergency measures to buy longer-term debt issued by the UK government.The 10-year U.S. Treasury yield was trading at 3.777 percent as of 12:00 EDT, Sept. 28. On Jan. 20, 2021, when Joe Biden assumed the presidency, the rate was only 1.077 percent.
Under the Biden administration, the 10-year Treasury yield has thus risen two and a half times. During the same period, 12-month inflation rose from 1.4 percent to 8.3 percent, jumping by almost five times.
Treasury yields have been rising since several Fed officials suggested that the central bank will keep raising interest rates until inflation is brought under control.
However, there are disagreements with the Federal Reserve as some have expressed concerns that the central bank might be moving too fast in its fight against inflation.
“There are lags in monetary policy, and we have moved expeditiously. We have done three 75 basis-point increases in a row, and [while] there is talk of more to get that rate to 4.25 percent to 4.5 percent by the end of the year, you’re not leaving much time to sort of look at each monthly release,” he said.