Homebuyers are facing even steeper borrowing costs this week as the average 30-year fixed mortgage rate reached its highest point in nearly a year.
Freddie Mac reported Thursday that the benchmark 30-year fixed rate climbed to 6.58%, up from 6.55% the previous week. At this same time last year, that rate stood at 6.74%.
When mortgage rates go up, monthly payments can increase by hundreds of dollars, shrinking what buyers can afford. The higher costs have caused many potential buyers to put their home searches on hold, contributing to sluggish home sales across the country this year.
Rates on 15-year fixed mortgages — a popular option for homeowners looking to refinance — also ticked upward. That average moved to 5.96% from 5.93% last week, compared to 5.87% one year ago, according to Freddie Mac.
Mortgage rates are shaped by a variety of economic forces, including Federal Reserve interest rate decisions and bond market expectations around inflation. They tend to move in step with the 10-year Treasury yield, which lenders use as a pricing benchmark for home loans.
Rates have trended upward for much of this year as violence in Iran has sent crude oil prices sharply higher, raising concerns that inflation could accelerate again. That pressure has pushed long-term bond yields well above where they were before the conflict began in late February, dragging mortgage rates along with them.
The 10-year Treasury yield stood at 4.7% at midday Thursday, up from 4.57% just a week earlier. Before the conflict broke out in late February, that yield was sitting at 3.97%.
Escalating violence in Iran and the resulting rise in oil prices are threatening to reverse recent progress on inflation, which had been cooling faster than many economists anticipated. If inflation heats back up, the Federal Reserve and other central banks could be pushed to raise interest rates further.
While the Fed does not directly set mortgage rates, its decisions on short-term interest rates are closely watched by bond investors and can ultimately influence 10-year Treasury yields — and by extension, what homebuyers pay to borrow.
The current 30-year average of 6.58% matches the rate last seen on August 21, making it the highest since that date. As recently as late February, the 30-year average had briefly dipped below 6% for the first time since late 2022.
Even though today’s long-term mortgage rates are still below where they were a year ago, their steady climb in recent months has continued to weigh on the housing market.
