The average rate on a 30-year mortgage in the U.S. rose for the fifth consecutive week, reaching its highest level since early August. According to mortgage buyer Freddie Mac, the rate climbed to 6.72% from 6.54% last week, although it remains lower than the 7.76% average from a year ago.
Similarly, borrowing costs on 15-year fixed-rate mortgages also increased this week, with the average rate rising to 5.99% from 5.71% last week. A year ago, the rate stood at 7.03%. These rate hikes can significantly impact borrowers, adding hundreds of dollars to their monthly costs and reducing their purchasing power, especially as home prices remain near all-time highs despite a sales slump since 2022.
The influencing factors behind mortgage rate fluctuations include the bond market's response to the Federal Reserve's interest rate policy decisions, as well as data on inflation and the economy. Lenders typically reference the trajectory of the 10-year Treasury yield to determine home loan pricing.
Recent reports have shown an increase in consumer confidence beyond economists' expectations, while job openings slightly decreased in September. However, the number of hires remained relatively stable. The upcoming U.S. jobs report for October could further impact bond yields if it exceeds expectations.
Freddie Mac's chief economist, Sam Khater, anticipates continued volatility in mortgage rates due to upcoming events such as the 2024 election, the Federal Reserve interest rate decision, and the jobs report. Despite the uncertainty, Khater believes that mortgage rates are peaking and are unlikely to reach the highs seen earlier this year.
Although the average rate on a 30-year mortgage has decreased from its peak of 7.22% in May, it hit a low of 6.08% in late September, the lowest level in two years. Economists project that mortgage rates will remain erratic this year but are expected to ease in 2025. This potential decrease in rates could enhance homebuyers' affordability but may also lead to higher home prices if more buyers enter the market.
