US and UK Mortgage Rates Hit Multi-Year Highs

Mortgage rates have surged to multi-year highs in the United States and United Kingdom, squeezing affordability for prospective homebuyers. In the US, the benchmark 30-year fixed rate mortgage rose from 6.95% to 7.2% within a week, marking its highest level in 18 months. This spike coincides with nationwide home prices reaching near-record highs of $429,100 as of August.

The Federal Reserve System drove these increases by raising its key interest rate for the first time in three years to combat surging inflation, with officials indicating the possibility of further hikes this year. Rates have also been pushed upward by rising 10-year Treasury yields, which economists link to soaring oil prices following military actions by the US and Israel against Iran on February 28.

In the UK, the average five-year fixed rate hit 5.87%, the highest level since November 2023. This increase was driven by volatility in financial markets and higher Sonia swap rates, leading all of the UK's big six mortgage lenders to raise rates this week.

While the National Association of Realtors reports that housing inventory has reached a decade-high of 1.62 million unsold homes, pending home sales in the US have fallen 4.7% over the past year as buyers are deterred by borrowing costs and general inflation.