The average rate on a 30-year fixed mortgage nudged upward this week, continuing to hover right around the 6.5% mark it has stayed near for roughly a month and a half.
According to mortgage buyer Freddie Mac, the benchmark 30-year fixed rate climbed to 6.49% from 6.47% the week before. At this same point last year, that rate stood at 6.77%.
Even small increases in mortgage rates can have a significant impact on homebuyers — adding hundreds of dollars each month to a borrower’s costs and shrinking what they can afford to spend on a home.
Rates on 15-year fixed mortgages — a popular option for homeowners looking to refinance — also ticked upward. That average moved from 5.81% to 5.84% this week. A year ago, the 15-year rate sat at 5.89%, Freddie Mac reported.
Mortgage rates are shaped by a combination of forces, including Federal Reserve policy, bond market activity, and investor expectations around inflation and economic growth. In general, they tend to move in line with the 10-year Treasury yield, which lenders rely on when setting home loan prices.
Rates have been climbing since the U.S.-Iran conflict erupted in late February, which disrupted crude oil shipments from the Persian Gulf to global markets. That disruption sent oil prices surging, fueling inflation and pushing bond yields — and mortgage rates — higher along with it.
More recently, oil prices have retreated somewhat as the two nations entered into negotiations aimed at ending the conflict. That has helped ease some of the upward pressure on bond yields. The 10-year Treasury yield stood at 4.38% at midday Thursday, down from 4.46% a week earlier, though it had briefly climbed above 4.5% earlier in the week. Before the war started in late February, the yield was just 3.97%.
Bond yields are still elevated, however, as inflation worries persist.
The Federal Reserve has indicated it may raise interest rates at least one more time before the year is out. While the central bank does not directly control mortgage rates, its decisions on short-term interest rates are closely watched by bond investors and can influence the 10-year Treasury yield over time.
As recently as late February, the 30-year mortgage rate had briefly dipped below 6% for the first time since late 2022 — a threshold it has not crossed again since. Four weeks ago, the rate hit 6.53%, its highest point since August 28.
Even though current rates are lower than they were a year ago, the uncertainty surrounding the war with Iran has kept many potential buyers on the sidelines. Sales of previously owned U.S. homes fell during the first quarter compared to the same period a year ago, continuing a national housing slowdown that began in 2022 when rates started rising from their pandemic-era lows. Sales were largely flat in April before picking up in May to their strongest pace since December.
Even so, existing home sales are still running close to a 4-million annual pace — well below the historical norm of around 5.2 million per year.
