The average 30-year mortgage rate is now above 7%

On Monday, the average rate for a 30-year mortgage surpassed the 7% mark again, a rise triggered by Moody’s downgrade of the U.S. credit rating on Friday, which stemmed from concerns over the country’s escalating debt levels.

This marks the first time since April 11 that the 30-year mortgage rate has gone above 7%, according to Mortgage News Daily, which tracks trends in the home loan industry. The rate slightly decreased later in the day, settling at approximately 6.99%, based on data from the publication.

Despite interest rate cuts by the Federal Reserve last year, mortgage rates have remained close to their 25-year highs because they closely follow the 10-year Treasury bond, which is influenced by economic conditions. Following the downgrade, markets saw a dip in early trading, with the yield on the 10-year Treasury rising above 5%, its highest point since late 2023.

Stock and bond prices gradually recovered, with the S&P 500 turning a 1.1% loss into a modest 0.2% gain by the end of the day.

However, because the nation’s debt issues are well known, investors have likely already priced them in, according to Brian Rehling, head of global fixed income strategy at Wells Fargo Investment Institute, and other analysts. They anticipate "limited additional market impact" after the initial reactions to Moody’s downgrade.

In contrast, high mortgage rates are expected to persist, and prospective homebuyers are still grappling with a lack of affordable homes. While home prices remain close to all-time highs, the higher borrowing costs make financing even more expensive.

Only about 1 in 5 homes listed for sale in March were affordable for households earning $75,000 annually, compared to around half of all listings before the pandemic, according to a recent National Association of Realtors (NAR) analysis.

Home buying activity typically picks up when mortgage rates drop below 6.7%, said Nadia Evangelou, senior economist and director of real estate research at NAR, in a CBS MoneyWatch interview last week.