According to CNBC, mortgage rates have seen a significant spike this week, primarily due to a swift selloff of U.S. Treasury bonds by investors.
This selloff, which affects the yield on the 10-year Treasury, is impacting various markets, including the crucial housing market. Some experts believe that this surge could be a direct result of growing tensions between the U.S. and other global powers, particularly the response to President Donald Trump’s tariff policies.
A Possible Retaliatory Move from China and Foreign Investors
The situation has grown more complex, especially with the possibility of China—one of the largest holders of U.S. mortgage-backed securities (MBS)—selling off its holdings in retaliation against the U.S. trade policies. China has already started reducing its MBS holdings, with a drop of 8.7% in 2022, which could lead to even more significant impacts on the housing market.
Mortgage experts are concerned that if China and other foreign countries like Japan and Canada decide to sell off their holdings at an accelerated pace, mortgage rates could rise further, affecting the affordability of home loans. This possibility of “widening spreads” between mortgage rates and Treasury yields has investors on edge, as it would make borrowing costs significantly higher for potential homebuyers.
Pressure on the Housing Market Amid Economic Uncertainty
The U.S. housing market was already facing challenges due to high home prices and consumer concerns. The ongoing volatility in the stock market and the potential for job losses has only exacerbated these fears. According to a recent Redfin survey, 20% of potential homebuyers were even selling stock to finance their down payments, highlighting the strain on consumers.
Meanwhile, the Federal Reserve’s decision to let its MBS holdings roll off its balance sheet is adding another layer of uncertainty. In previous economic crises, the Fed stepped in to buy MBS and keep rates low, but with its current strategy, it could be contributing to the upward pressure on mortgage rates.
Source
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/here-is-how-china-could-sabotage-the-us-housing-market/