The average rate on a 30-year mortgage in the United States increased for the sixth week in a row, reaching its highest level since early July.
The rate rose to 6.79% from 6.72% the previous week, according to Freddie Mac. Although the current rate is down from last year’s 7.5%, it still represents a significant jump in borrowing costs, which can add hundreds of dollars to monthly mortgage payments.
Along with the rise in 30-year mortgage rates, the average rate on 15-year fixed-rate mortgages also saw a slight uptick, rising to 6% from 5.99%. This is still lower than the 6.81% rate from a year ago. Such increases in mortgage rates continue to challenge homebuyers, particularly as home prices remain near historic highs and the housing market is in a sales slump.
Mortgage rates are largely influenced by the yield on US 10-year Treasury bonds, which have been rising recently due to positive economic data and expectations of stronger inflation under the incoming administration. As of Thursday, the yield on the 10-year Treasury bond had surged to 4.36%, up from 3.62% in mid-September.
These higher borrowing costs come at a time when the housing market has already been subdued, with mortgage applications declining for six consecutive weeks. The latest data from the Mortgage Bankers Association shows a 10.8% drop in mortgage applications on a seasonally adjusted basis, while refinancing applications fell by 19%. Despite the decline, refinancing requests remain higher compared to the same period last year when rates were even higher.
Ralph McLaughlin, senior economist at Realtor.com, notes that while mortgage rates are expected to stabilize by the end of the year, they are likely to remain higher than initially anticipated, particularly as the markets adjust to changes in fiscal and monetary policy following the election of President-Elect Donald Trump.
The Federal Reserve recently made a quarter-point interest rate cut in an effort to reduce inflation and support the job market. However, the trajectory of future rate cuts is uncertain, as economic growth continues to show resilience, and the political landscape shifts under the new administration. The Fed’s decisions regarding future rate cuts could influence mortgage rates in the coming months, but rising Treasury yields may limit their impact on home loan costs.
With input from the Associated Press, ABC News, and CBS News.
