Mortgage rates rise as Fitch downgrades U.S. government debt

The average rate on the 15-year mortgage rose to 6.25% from 6.11% last week. The 15-year was at 4.26% a year ago.

Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage. 

Separate data from Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging 7.2% as of Thursday afternoon.

The U.S. government’s debt rating was lowered on Tuesday by Fitch Ratings, followed a day later by downgrades of Freddie Mac’s and Fannie Mae’s credit. These government-sponsored enterprises benefit from financial support from the U.S. government, the company said.

In lowering the U.S. government’s credit rating one notch to AA+ from AAA, Fitch said the move reflects “expected fiscal deterioration,” a “high and growing” government debt burden and an “erosion of governance” in face of repeated debt-limit standoffs and other ills.

What Freddie Mac said: Freddie Mac noted that higher rates haven’t moved the needle on affordability. “Despite higher rates and lower purchase demand, home prices have increased due to very low unsold inventory,” Sam Khater, chief economist at Freddie Mac, said in a statement. 

What are they saying? “With the economy and job market humming along at a positive pace, the prospect of a recession is dimming for the next six to 12 months,” George Ratiu, chief economist at real-estate data firm Keeping Current Matters, said in a statement.

“Mortgage rates are expected to remain elevated for the next couple of months, keeping pressure on affordability,” he added. “For buyers who are not in a hurry, the fall and winter months could bring better values and a less competitive environment to find the right home.”