The average interest rate on a 30-year fixed-rate mortgage in the United States has risen to 6.66%, its highest point in a year, according to data released by Freddie Mac on Thursday. This marks the fourth consecutive week of increases, posing an additional obstacle for individuals seeking to purchase homes amidst already elevated borrowing costs.
Prospective homebuyers are facing added financial pressure, as higher mortgage rates can increase monthly payments by hundreds of dollars, consequently reducing purchasing power. This trend is considered a contributing factor to the sluggish pace of home sales observed throughout the year.
Rates for 15-year fixed-rate mortgages, a popular choice for refinancing, also saw an uptick, reaching an average of 6.04% from 5.96% the previous week. This compares to an average rate of 5.85% one year ago.
Several factors influence mortgage rates, including the Federal Reserve's monetary policy and investor expectations regarding the economy and inflation. These rates typically follow the movement of the 10-year Treasury yield. The recent surge in oil prices, partly attributed to geopolitical tensions, has fueled inflation expectations, driving up long-term bond yields and subsequently mortgage rates.
The 10-year Treasury yield stood at 4.66% on Thursday, a significant increase from 3.97% in late February before the escalation of conflict in Iran. The current 30-year mortgage rate is the highest seen since July 31, 2025, when it registered at 6.72%. In late February, the average rate had briefly dipped below 6% for the first time since late 2022.
This latest increase in mortgage rates comes just after the Federal Reserve announced its decision to keep its key interest rate unchanged, as it navigates persistent inflation. While the Federal Reserve does not directly set mortgage rates, its policy decisions influence bond markets and the yields that lenders use to price home loans.
Despite current rates being lower than at the same time last year, their upward trend has negatively impacted home sales. From January to June, sales of previously occupied U.S. homes showed a modest increase of 0.7% compared to the previous year, but annual sales figures remain near 4 million, significantly below the historical average of 5.2 million.
The housing market has been experiencing a slump since 2022, when mortgage rates began their ascent from pandemic-era lows. Last year, sales of previously occupied homes remained largely flat, marking a 30-year low.