Mortgage Rates Soar to July Highs: Will Demand Keep Dropping?

REAL ESTATE

The dream of homeownership is slipping further out of reach as US mortgage rates inch closer to that ominous 7 percent mark. As of January 2, the average rate for a 30-year mortgage skyrocketed to 6.91 percent, a notable jump from 6.85 percent just a week prior, according to Freddie Mac’s latest data. Meanwhile, the Mortgage Bankers Association reported a surge to 6.97 percent, marking the highest level in nearly six months. These elevated borrowing costs are making housing less affordable, leading to a significant drop in demand, with home-purchase applications plummeting nearly 7 percent—hitting the lowest point since mid-November.

“It’s not the best way to kick off the new year,” warns Odeta Kushi, deputy chief economist at First American Financial Corp. As experts brace themselves for a prolonged period of high rates, the outlook for 2025 isn’t looking rosy for the housing market. The correlation between mortgage rates and Treasury yields remains steadfast, especially as Federal Reserve officials signal a slower pace for interest rate cuts due to stubborn inflation. “Compared to this time last year, rates are elevated, and the headwinds for affordability continue to be a challenge,” said Sam Khater, Freddie Mac’s chief economist, underscoring the difficulties ahead for potential homebuyers.

TECHNOLOGY

In a move that raises eyebrows, Apple has reached a $95 million settlement in a lawsuit claiming its beloved virtual assistant, Siri, was snooping on users without their consent. Filed in a federal court in Oakland, California, this five-year-old lawsuit alleges that Apple inadvertently turned on Siri, recording conversations on iPhones and other devices for over a decade—often without the users even saying the magic words, “Hey, Siri.” Some of these recordings were reportedly shared with advertisers to target consumers more effectively.

Though Apple isn’t admitting any wrongdoing, the proposed settlement still requires approval from US District Judge Jeffrey White. If the judge greenlights it, millions of consumers who owned Siri-equipped devices from September 17, 2014, to the end of last year could claim up to $20 per eligible device, although this amount may fluctuate based on the total number of claims received.

LABOR

In a bid to avert a potential strike, leaders from a US dockworkers’ union and their employers will reconvene on January 7 for contract negotiations. With a mid-January deadline looming, this is a crucial moment for importers and exporters who are anxious about labor disruptions that could paralyze major ports along the US East and Gulf coasts—accounting for nearly half of the nation’s container traffic, according to the American Association of Port Authorities. The looming question: will employers be permitted to introduce semi-automated machines at port facilities under the new contract?

Back in October, the International Longshoremen’s Association struck a tentative agreement with ocean carriers and terminal operators that included a substantial wage increase of 62 percent over six years. However, the technology issue remains a sticking point.

FINANCE

In a significant move, Morgan Stanley has officially cut ties with a prominent climate-banking alliance, joining a wave of Wall Street powerhouses stepping away from a group dedicated to reducing greenhouse-gas emissions. The decision to exit the Net-Zero Banking Alliance echoes similar moves by Citigroup and Bank of America earlier this week. This exodus comes amid rising political tensions in the US, as major financial institutions find themselves at the center of Republican-led campaigns decrying net-zero initiatives as climate cartels.

Despite this departure, banks like Morgan Stanley reaffirm their commitment to achieving net-zero emissions and assisting clients in reducing their carbon footprints. “We will continue to transparently report on our progress as we work toward our 2030 interim financed-emissions targets,” the bank stated.

GOLD

In a move that luxury watch enthusiasts won’t overlook, Rolex has announced price hikes on some of its most coveted models, with increases reaching as much as 8% following a surge in gold prices this year. The iconic Swiss brand, overseen by a foundation named after its cofounder Hans Wilsdorf, kicked off 2024 with marked price jumps on certain gold models. For instance, a yellow gold Day-Date now retails for $45,809, up from $42,093, while a yellow gold GMT-Master II is priced at $45,790, rising from $42,404.

Rolex typically adjusts prices annually on January 1, and these increases reflect both demand for premium luxury items and the rising costs of materials. With gold witnessing its most significant annual price increase in 14 years—soaring by 27% in 2024—the hike in Rolex prices is not surprising, though this year’s adjustments are steeper than those of the previous year.

CURRENCY

The euro has stumbled to its weakest point against the dollar in over two years, while the pound has slid to an eight-month low, fueled by ongoing worries about Europe’s economic stability. The euro dropped by 0.5% to $1.0306, the lowest it has been since November 2022, reflecting an 8% decline since late September. Simultaneously, the pound fell 1% to $1.2389, marking its weakest level since May.

This downward trend for the euro is driven by fears that the region’s export-oriented economies may face the brunt of US trade tariffs, in addition to expectations that the European Central Bank will need to implement more aggressive interest rate cuts than its US counterpart. Political instability in major European economies has compounded these concerns. For the pound, weak growth continues to be a significant issue, with Britain’s GDP remaining flat in the third quarter of 2024 and the Bank of England forecasting no growth for the fourth quarter.

“Weak growth is a persistent challenge for Germany, France, and the UK, with the latter facing heightened recession fears due to soft GDP figures towards the end of 2024,” explains Jane Foley, head of FX strategy at Rabobank, predicting that the euro may reach parity with the dollar in the second quarter.