Average Rate on 30-Year Mortgage Hits 7%, Its Fifth Straight Increase and Highest Level Since May
Mortgage Rates Continue to Climb
The average rate on a 30-year mortgage in the U.S. has ticked up to 7.04%, the highest level in eight months. This marks the fifth consecutive week of increases, with the rate rising from 6.93% last week. A year ago, the average rate was 6.6%.
15-Year Fixed-Rate Mortgage Borrowing Costs Also Rise
The average rate on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also increased to 6.27% from 6.14% last week. A year ago, it averaged 5.76%.
Bond Yields Drive Mortgage Rate Increases
The rise in mortgage rates reflects a surge in the bond yields that lenders use as a guide to price mortgages, specifically the yield on the U.S. 10-year Treasury. The yield on the 10-year Treasury has climbed from 3.62% in mid-September to 4.61% as of midday Thursday.
Housing Market Slump Continues
The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, prolonging a national home sales slump that began in 2022. While sales of previously occupied U.S. homes rose in November for the second straight month, the housing market is on track to end 2024 as its worst year for sales since 1995. Full-year home sales data are due out next week.
Average Rate on 30-Year Mortgage at Highest Level Since May
The average rate on a 30-year mortgage is now the highest it’s been since May 9, when it was at 7.09%.
Federal Reserve’s Rate Hike Expectations
Interest rates have been climbing since the Federal Reserve signaled last month that it expects to raise its benchmark rate just twice this year, down from the four cuts it forecast in September. The Fed is tapping the brakes on rate cuts because inflation remains stubbornly above the central bank’s 2% target, even though it’s fallen from its mid-2022 peak. Economists also worry that President-elect Donald Trump’s economic policies, notably his plan to vastly increase tariffs on imports, could fuel inflation.
Conclusion
The recent surge in mortgage rates has made it more expensive for homebuyers, leading to a decline in sales. As the Federal Reserve continues to monitor inflation, economists expect interest rates to remain elevated, potentially affecting the housing market and overall economy.
FAQs
* What is the current average rate on a 30-year mortgage?
The current average rate is 7.04%.
* How many weeks has the average rate on a 30-year mortgage increased in a row? The rate has increased for five straight weeks.
* What is the current average rate on a 15-year fixed-rate mortgage? The current average rate is 6.27%.
* What is driving the rise in mortgage rates? The rise in bond yields, specifically the yield on the U.S. 10-year Treasury, is driving the increase in mortgage rates.
* What is the impact of the rise in mortgage rates on the housing market? The elevated mortgage rates are discouraging homebuyers, leading to a decline in sales and prolonging the national home sales slump.
