The average 30-year mortgage rate in the US has hit 7.12%

Mortgage rates have surged, with the average rate for a 30-year fixed mortgage reaching 7.12%, the highest since last month. This increase is partly due to the rise in the yield on the 10-year Treasury, driven by a robust employment report from ADP. Federal Reserve Chairman Jerome Powell's remarks suggesting further interest rate hikes also contributed to the upward trend, as well as the latest interest rate hike.

Within just one week, the 30-year fixed mortgage rate has climbed by 31 basis points, resulting in a significant impact on monthly payments for homebuyers. For example, a $400,000 mortgage now requires a monthly payment of $2,720 compared to $2,637.

The higher mortgage rates have created a situation known as the "golden handcuff effect" for sellers. Many homeowners currently enjoy historically low interest rates below 4% or even 3%, making them reluctant to sell and lose the advantage of their low-rate mortgage. This sentiment has contributed to a shortage of homes for sale, with new listings this year lagging behind last year's pace by 20%.

The combination of rising mortgage rates and homeowners' reluctance to give up their low-rate mortgages has resulted in a challenging housing market, impacting both buyers and sellers.