M
ortgage rates jumped to their highest level in months on Monday, following Moody's decision to downgrade the US credit rating. The average rate for a 30-year fixed loan surged to 7.04%, according to Mortgage News Daily, marking the highest point since April 11. This sudden increase is largely attributed to market volatility and the impact of the credit rating downgrade.

    While the mortgage industry had anticipated some movement in rates, the magnitude of the jump was unexpected. "It's a fairly big jump, day-over-day," said Matthew Graham, chief operating officer at Mortgage News Daily, "but it doesn't change the bigger picture." The recent surge in mortgage rates has already taken its toll on the housing market, with pending sales of existing homes dropping 3.2% in April compared to last year.

    Homebuilders have also reported a significant decline in demand, with sentiment hitting its lowest level since December 2023. However, there was a brief respite in May when mortgage rates hovered around 6.9%, leading to a slight increase in demand from homebuyers. Nevertheless, any rate above 7% seems to be a major deterrent for potential buyers, and even small increases can make it difficult for some individuals to qualify for a mortgage.