Mortgage rates in the United States have experienced a slight increase for the second consecutive week, a minor obstacle for potential home buyers as the spring homebuying season begins to pick up. Freddie Mac reported on Thursday that the average rate for a 30-year mortgage increased to 6.67% from the previous week’s 6.65%. Compared to a year ago, when the rate was at 6.87%, the current rates reflect a continuing struggle for those looking to purchase homes after an extended period of escalating home prices.
In recent weeks, the average rate for a 30-year home loan has only increased twice over the past nine weeks, which is encouraging news for prospective homebuyers battling the affordability crisis. Freddie Mac’s chief economist, Sam Khater, noted that the 30-year fixed-rate mortgage remaining under 7% for nine consecutive weeks is beneficial to both buyers and sellers.
Interest rates for 15-year fixed-rate mortgages, commonly chosen by homeowners seeking to refinance, also saw an increase this week. The average rate moved up to 5.83% from last week’s 5.8%. During the same period last year, the rate averaged higher at 6.21%, according to Freddie Mac.
Several factors affect mortgage rates, including expectations from bond market investors regarding future inflation, the global demand for U.S. Treasurys, and policy decisions from the Federal Reserve concerning interest rates. The average rate for a 30-year mortgage briefly surpassed 7% in mid-January but has generally been on the decline since then. This trend generally mirrors changes in the 10-year Treasury yield, often used by lenders for pricing home loans.
Back in mid-January, the yield was approaching 4.8% but has mostly decreased due to concerns about economic growth and the impact of tariffs imposed by the Trump administration on imported goods from major trading partners. As of Thursday’s midday trading, the yield was at 4.23%.
Tariff implementations can lead to higher inflation, potentially resulting in increased yields for the 10-year Treasury note and consequently, higher mortgage rates. Bond investors typically demand higher returns when inflation remains high.
This year, the Federal Reserve has kept its key interest rate constant after a series of significant cuts toward the end of the previous year. Although lower rates can stimulate economic growth, they also carry the potential to fuel inflation. The central bank on Wednesday maintained its benchmark interest rate and hinted that it still anticipates two rate reductions this year, despite persistent inflation concerns.
While the Fed doesn’t directly establish mortgage rates, its actions can nonetheless influence borrowing costs for mortgages, as well as other types of consumer loans. The chief economist at the Mortgage Bankers Association, Mike Fratantoni, predicted that mortgage rates are likely to remain narrowly confined, between 6.5% and 7%, which should help sustain the spring housing market.
Dating back to 2022, the U.S. housing market has seen a downturn in sales following a previous surge in mortgage rates from pandemic-era lows. According to the National Association of Realtors, the sales of previously occupied homes hit their lowest numbers in nearly three decades last year. Although there was a 4.2% rise in sales last month from January, they still saw a 1.2% decrease compared to February of the previous year.