The average rate for a 30-year mortgage in the United States has risen this week to just over 7%, marking the highest figure in the past eight months. According to mortgage buyer Freddie Mac, the rate increased from last week’s 6.93% to reach 7.04%. In comparison, this time last year, the rate stood at 6.6%. This marks the fifth consecutive week of rising rates.
Additionally, borrowing costs for 15-year fixed-rate mortgages, often chosen by homeowners looking to refinance, also saw an increase. The average rate rose from 6.14% the previous week to 6.27% this week, a notable rise from the 5.76% average recorded a year ago, as reported by Freddie Mac.
The rise in borrowing costs can be attributed to the increase in bond yields, which lenders use as a benchmark for pricing mortgages. Specifically, the yield on the U.S. 10-year Treasury has jumped from 3.62% in mid-September to around 4.61% as of Thursday afternoon.
These high mortgage rates are creating an additional financial burden for borrowers, potentially adding hundreds of dollars to their monthly payments. This situation has deterred many homebuyers, contributing to a prolonged slump in home sales that has persisted since 2022.
Although sales figures for previously owned homes in November showed a slight uptick for the second consecutive month, the housing market is still expected to close out 2024 as the weakest year for sales since 1995. Comprehensive home sales statistics are set to be released next week.
The current average mortgage rate for a 30-year loan has reached its highest level since May 9, when it was recorded at 7.09%. Rates have been on an upward trend since the Federal Reserve hinted last month that it anticipates only two reductions of its benchmark interest rate this year, a drop from the previous expectation of four cuts made in September.
The Federal Reserve’s cautious approach to rate cuts is primarily due to persistent inflation rates that remain above the central bank’s 2% target, despite having decreased from their peak levels seen in mid-2022. Concerns also loom over potential inflationary impacts stemming from the economic policies of President-elect Donald Trump, particularly his proposal to significantly raise tariffs on imports.
Predicting the movement of mortgage rates can be challenging due to the myriad of factors at play, including government expenditure, overall economic health, geopolitical tensions, and fluctuations in stock and bond markets. Many economists now forecast that the average 30-year mortgage rate will stay above 6% for the remainder of the year, with some projections suggesting it could reach as high as 6.8%.
