The average rate on a 30-year mortgage in the U.S. climbed to 6.84% this week, the highest level since July. This rate is up from 6.78% last week but still lower than the 7.29% average a year ago. Borrowing costs on 15-year fixed-rate mortgages also increased, rising to 6.02% from 5.99% last week and down from 6.67% a year ago.
Rising mortgage rates can significantly impact borrowers, adding hundreds of dollars to monthly costs and reducing purchasing power, especially as home prices remain near all-time highs. U.S. home sales are on track for their worst year since 1995.
The 30-year mortgage rate hit a two-year low of 6.08% in late September but has been on the rise since then, following the movement of the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans. The yield, which has been around 4.4% recently, surged after the presidential election due to expectations of increased inflation under the new administration.
Mortgage rates dropped slightly above 6% in September after the Federal Reserve cut its main interest rate for the first time in over four years. While the Fed doesn't directly control mortgage rates, its actions and inflation trends influence the 10-year Treasury yield, which in turn affects mortgage rates.
The recent increase in mortgage rates has dampened the housing market, with sales of previously owned U.S. homes slowing down. Economists predict continued volatility in mortgage rates this year, with expectations for rates to hover around 6% in 2025.
