The average interest rate for a 30-year fixed mortgage in the U.S. has climbed to 6.58%, marking its highest point in nearly a year, according to Freddie Mac. This increase in borrowing costs comes at a time when rising oil prices are already impacting household budgets and contributing to a slowdown in the housing market.
The current rate is up from 6.55% last week and compares to an average of 6.74% one year ago. Higher mortgage rates can significantly increase monthly payments for borrowers, potentially adding hundreds of dollars to housing costs and reducing purchasing power. This often leads prospective buyers to postpone home purchases, contributing to the sluggish U.S. home sales observed this year.
Mortgage rates are influenced by various factors, including Federal Reserve monetary policy and the expectations of bond market investors regarding the economy and inflation. These rates generally follow the trend of the 10-year Treasury yield, which serves as a benchmark for lenders. The 10-year Treasury yield has seen an upward trend, reaching 4.7% on Thursday, up from 4.57% the previous week and 3.97% in late February. This rise is attributed in part to the conflict in Iran, which has driven crude oil prices higher and fueled expectations of increased inflation.