The average long-term U.S. mortgage rate has increased for the third consecutive week, impacting home loan borrowing costs as the spring homebuying season gains momentum. According to Freddie Mac, the average rate on a 30-year mortgage rose to 6.90% from 6.77% last week, marking a significant increase from the 6.5% rate recorded a year ago.
Similarly, 15-year fixed-rate mortgages also experienced a rise in borrowing costs, with the average rate climbing to 6.29% from 6.12% last week. This surge in rates is attributed to movements in the 10-year Treasury yield, which serves as a benchmark for loan pricing. Positive economic indicators such as reports on inflation, job market strength, and overall economic performance have raised concerns among bond investors regarding potential delays in Federal Reserve interest rate cuts.
Higher mortgage rates translate to increased monthly costs for borrowers, potentially limiting their purchasing power in an already challenging housing market. Homeowners who secured lower rates in previous years may be deterred from selling their homes due to the current rate environment. The current average 30-year mortgage rate of 6.90% is notably higher than the 3.89% rate recorded just two years ago.
While mortgage rates have decreased from the peak of 7.79% in late October, they remain a significant factor influencing the housing market. The recent uptick in rates, combined with limited housing inventory and escalating prices, poses financial challenges for prospective buyers during the peak home sales season.
Despite historically strong economic conditions, the current housing market faces unique challenges due to low affordability levels. The impact of economic growth on homebuyers is more pronounced in the current cycle, where even minor shifts in affordability can have substantial consequences for buyers.
