Mortgage rates for 30-year loans climbed to the highest level in three weeks on concern that lawmakers will fail to agree on an increase in the country’s debt ceiling.
The average rate for a 30-year, fixed-rate loan rose to 4.55 percent in the week ended Thursday from 4.52 percent the week before, according to Freddie Mac. The average 15-year rate was unchanged at 3.66 percent.
President Obama and Congress are under pressure to reach a deal before Aug. 2 to increase the amount of money the government can borrow and avoid a default. Yields for 10-year Treasurys, a benchmark for other debt, climbed three basis points Wednesday to 2.98 percent and earlier this week crossed above 3 percent.
“What we lack in the mortgage market is confidence in the longer-term economic outlook,” said Michael R. Englund, chief economist at Action Economics. “A good portion of the country thinks the government is going to default fairly imminently.”
Mortgage applications dropped 5 percent last week, according to an index from the Mortgage Bankers Association in Washington. The group’s refinancing measure declined 5.5 percent in the period ended July 22 from the prior week, while a gauge of purchases fell 3.8 percent to the lowest since February.
Demand for homes has been constrained by stricter lending rules, the high unemployment rate and a glut of distressed properties that’s dragging down values. Home values in 20 U.S. cities dropped 4.5 percent in the year ended in May, the S&P/Case-Shiller index showed this week. Sales of new single-family houses fell 1 percent in June to a three-month low, the Commerce Department reported on Tuesday.