The most serious pressure remains on American households planning to purchase a home. Despite the increase in overall wealth in the United States, the affordability of real estate continues to deteriorate due to high prices and the sharp increase in the cost of mortgage lending.
The average interest rate on 30-year mortgages has reached 7.40%. This is the highest level since November 2023. For comparison, a year ago it was 6.30%. Thus, mortgage rates have increased by 1.1 percentage points in 12 months.
The main reason is the increase in the cost of financing in the bond markets. The yield on 10-year U.S. Treasury bonds, which strongly influences mortgage rates, reached 5.23%. This is an increase of about 1.35 percentage points since the beginning of the conflict with Iran in February.
The rise in the cost of credit has a direct impact on family budgets. On a $400,000 mortgage over a 30-year term, the increase in interest from 6.30% to 7.40% means an approximately $290 higher monthly payment, or nearly $3,500 in additional costs per year. The calculation includes only the principal and interest, excluding taxes, insurance and other costs.
The consequences are already affecting the activity of the housing market. According to data from the Mortgage Bankers Association, mortgage applications fell by 4.2% in one week. Applications for home purchases are 15% lower than in the same period last year, and those for refinancing have collapsed by 56%.
As a result, more and more potential buyers are postponing the acquisition of their own home, while current owners are refraining from selling, so as not to replace their existing more favorable mortgage conditions with new loans at significantly higher interest rates. This further hinders the normal functioning of the housing market.
Detailed statistics on average property prices in Bulgaria by cities and neighborhoods can be seen at imot.bg