July 28 (Bloomberg) -- Mortgage rates for 30-year U.S. loans climbed to the highest level in three weeks amid concern that lawmakers will fail to agree on an increase in the nation’s debt ceiling.
The average rate for a 30-year fixed loan rose to 4.55 percent in the week ended today from 4.52 percent, according to Freddie Mac. The average 15-year rate was unchanged at 3.66 percent, the McLean, Virginia-based mortgage-finance company said in a statement.
President Barack Obama and Congress are under pressure to reach a deal before Aug. 2 to increase the amount of money the government can borrow and avoid a default. Yields for 10-year Treasuries, a benchmark for other debt, climbed three basis points yesterday to 2.98 percent and earlier this week crossed above 3 percent.
“What we lack in the mortgage market is confidence in the longer-term economic outlook,” Mike Englund, chief economist at Action Economics LLC, said in a telephone interview yesterday from Boulder, Colorado. “A good portion of the country thinks the government is going to default fairly imminently.”
U.S. mortgage applications dropped 5 percent last week, according to an index from the Mortgage Bankers Association in Washington. The group’s refinancing measure declined 5.5 percent in the period ended July 22 from the prior week, while a gauge of purchases fell 3.8 percent to the lowest since February.
Demand for homes has been constrained by stricter lending rules, an unemployment rate above 9 percent and a glut of distressed properties that’s dragging down values. Home values in 20 U.S. cities dropped 4.5 percent in the year ended in May, the S&P/Case-Shiller index showed this week. Sales of new single-family houses fell 1 percent in June to a three-month low, the Commerce Department reported July 26.
--With assistance from Bob Willis and Jillian Berman in Washington. Editors: Kara Wetzel, Christine Maurus
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