Claire Boston Says Mortgages Hit 6.67% as House Acts
Mortgages climbed to 6.67% this spring as the House of Representatives passed its version of a bipartisan housing affordability bill. That was the highest level of the year, and it came after rates had been about 6.75% the day before.
Claire Boston said, “I know Brooke, I wish I had better news. I know.” She added, “We have just seen mortgage rates rise because we are having this absolute bond market route right now.”
10-year Treasury yield drives rates
The 10-year Treasury yield rose quickly because investors were worried about inflation, and mortgage rates moved with it. Boston said, “And the 10-year Treasury yield and mortgage rates are really closely linked.”
Rates had briefly fallen below 6% before rising again, but Boston said the latest reading was a problem in the peak spring home buying season. “These are the highest levels of the year though, essentially, and we're in the peak spring home buying time, so it's definitely not good news.”
3% mortgages keep owners put
Homeowners with a 3% mortgage are reluctant to move because they would have to pay about 6.7% for a new loan. Boston described that as the lock-in effect: “We talk about this lock and effect all the time.”
That gap leaves fewer existing homes coming to market even as borrowing costs rise for buyers who still need financing. Higher home equity loan rates have also moved up, and the cost of construction is higher.
Lowe's sees demand pressure
Marvin Ellison said, “this is arguably the most difficult do it yourself housing environment that I can remember since the financial crisis.” He also said Lowe's had delivered four consecutive quarters of positive comps with the DIY customer.
The DIY customer makes up about 60% to 65% of Lowe's revenue, so a weaker housing backdrop reaches well beyond mortgage shoppers. If rates hold near this range, buyers who were waiting for sub-6% loans may stay on the sidelines while owners with cheaper loans remain hesitant to list.
The House vote adds a legislative response to the rate move, but borrowers are still facing the higher financing cost already in place. Boston put the tradeoff plainly: “If you've got that 3% mortgage, why would you move now if you're going to have to pay 6.7?”
