Mortgage rates in the United States saw a slight increase this week, bringing the average rate for a 30-year fixed mortgage closer to its highest point of the year. The benchmark rate rose to 6.66% from 6.65% last week, according to Freddie Mac, a mortgage finance company. This figure is now just below the year's high of 6.69% reached earlier this month and is comparable to rates seen four weeks ago. A year prior, the average rate stood at 6.56%.
This rise in borrowing costs can add significant monthly expenses for homebuyers, potentially limiting their purchasing power and leading some to postpone home purchases. This hesitancy is a contributing factor to the continued slowdown in U.S. home sales throughout the year.
Rates for 15-year fixed-rate mortgages, often utilized by homeowners refinancing existing loans, also increased. The average rate for these loans moved to 5.98% from 5.95% last week, compared to 5.69% a year ago.
Several factors influence mortgage rates, including inflation, Federal Reserve policy decisions, and investor expectations for the economy. Mortgage rates generally track the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans. The 10-year Treasury yield was at 4.66% on Thursday, a notable increase from 3.97% in late February before the conflict in the Middle East began. Analysts suggest that the war, which has driven up crude oil prices and fueled inflation expectations, along with concerns over the U.S. government's debt, have contributed to higher long-term bond yields and consequently, mortgage rates.
The U.S. housing market has experienced a slump since 2022, when mortgage rates began their ascent from historic lows recorded during the pandemic. Sales of previously occupied homes were at a 30-year low last year and continued to slow in July.