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.

To contact the reporter on this story:
Ashwin Seshagiri in New York at
aseshagiri@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net