Mortgage rates in the United States have climbed for a sixth consecutive week, reaching their highest level since early July. As of this week, the average rate on a 30-year fixed mortgage rose to 6.79%, up from 6.72% the previous week, according to data released by mortgage buyer Freddie Mac. This figure remains lower than the same time last year, when the rate averaged 7.5%. The rate increase also extends to 15-year fixed-rate mortgages, a popular choice among homeowners looking to refinance. The average 15-year rate rose slightly to 6% from last week’s 5.99%. Despite this recent rise, it still falls short of the 6.81% rate recorded a year ago. Rising mortgage rates have implications for borrowers, often leading to higher monthly payments and affecting purchasing power, which has contributed to a persistent sales slump in the housing market that has continued since 2022.
Economic and Market Factors Behind Rising Mortgage Rates
The upward trend in mortgage rates is largely attributed to rising yields on the U.S. 10-year Treasury bond, a benchmark that lenders use to set mortgage prices. Treasury bond yields have recently been influenced by economic reports and projections on inflation, with the current yield climbing to 4.36% on Thursday, a significant increase from 3.62% in mid-September. Experts suggest that rising bond yields are partly driven by expectations of stronger economic growth and inflation under President-elect Donald Trump’s policies, which are expected to include increased tariffs, lower tax rates, and lighter regulatory measures. Although the Federal Reserve does not directly set mortgage rates, its recent decision to cut its main interest rate has played a role in easing rates temporarily. In late September, mortgage rates dipped to 6.08%, the lowest level seen in two years, following the Fed’s rate cut. However, the latest market shifts indicate that rates are likely to remain elevated in the coming months.
Impact on Homebuyers and Future Mortgage Market Trends
The rise in mortgage rate has had a dampening effect on the housing market, particularly for those looking to purchase or refinance their homes. According to data from the Mortgage Bankers Association (MBA), mortgage applications fell by 10.8% last week, marking the sixth straight week of decline. Applications for refinancing mortgages also dropped by 19%, though they remain higher than they were during the same week last year when rates were steeper. Ralph McLaughlin, senior economist at Realtor.com, anticipates that mortgage rate may stabilize by the year’s end but at a level higher than previously expected. MBA CEO Bob Broeksmit echoes the view that the market may remain volatile as it reacts to the outcomes of the recent election and upcoming policy moves from the Federal Reserve. The combination of higher mortgage rates and fluctuating demand signals continued challenges for potential homebuyers and homeowners looking to refinance in the current economic climate.
