Home News U.S. in ‘New Financial Territory’ as Mortgage Rate Surges—Larry Summers

U.S. in ‘New Financial Territory’ as Mortgage Rate Surges—Larry Summers

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Economist and former U.S. Treasury Secretary Larry Summers Yields on 10-year US Treasury bonds briefly hit 4% on Wednesday for the first time in a decade, and mortgage rates soared, he said the country had now entered “new financial territory”.

“The 10-year interest rate in the US just passed 4%. Mortgage rates are comfortably above 7%. We are now in a new financial realm.” summers wrote upon twitter.

Yields on 10-year US Treasuries hit 4.017% on Wednesday, but fell to 3.963% shortly after the Bank of England announced it would buy longer-term British government bonds, according to Tradeweb.

The 10-year Treasury rate, which measures what the government would pay an investor if they bought a 10-year Treasury bond today, is considered an important benchmark influencing borrowing costs for consumers. I’m here. Its value is highly influenced by inflation, interest rate risk, and investor confidence in the US economy.

Mortgage interest rates have skyrocketed in recent days. On Wednesday, it jumped to 6.52%, the highest level since August 2008, according to data from the Home Loan Bankers Association. Investigation on tuesday mortgage news daily The 30-year fixed rate surpassed 7% to 7.08%, the highest interest rate in less than 20 years.

A child rides a scooter in front of an “Open House” flag outside a home in Los Angeles on Sept. 22, 2022. Former Treasury Secretary Larry Summers said the US had entered a “new financial realm.”
Alison Dinner/Getty Images

The news shocked the housing market. A sharp rise in mortgage rates will make things even more difficult for potential homebuyers who were already suffering from skyrocketing home prices, high demand, inflation and supply shortages leading to stiff competition within the market. It is inevitable. .

The rise means many potential homebuyers may lose their mortgage eligibility, and some will be cut off the market entirely.

While this sounds like bad news on top of bad news for borrowers and aspiring homebuyers, analysts foresee contracting demand and an eventual decline in home prices, according to the announced housing market. I believe that this is a sign of an adjustment in the

This amendment will be driven in part by the Federal Reserve rate hike in 2022. The most recent September 21 rate hike raised the benchmark rate by another three-quarters of a percentage point.

‘There was a huge imbalance…house prices were rising at an unsustainable rate,’ says Fed chairman Jerome Powell At a press conference on September 21, he said: “Over the long term, we will see house prices rise at a reasonable level and at a reasonable pace to better balance supply and demand so that people can afford to buy homes again. Perhaps the housing market will have to go through an adjustment to get back to where it is.”

Summers, who served as U.S. Treasury secretary from 1999 to 2001, recently praised the Federal Reserve’s “steadfast commitment to disinflation,” but said, “We are far from out of the woods.” I warned you.

Newsweek I reached out to Summers for comment.

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