US Mortgage Rates Hold Steady at Nearly 3-Year High

The average long-term U.S. home loan rate held steady this week at 7.40%, maintaining its position as the highest level seen in nearly three years, according to data from mortgage buyer Freddie Mac. This marks an end to a seven-week climb for the rate, which has not been this high since November 16, 2023, when it reached 7.44%.

In contrast, borrowing costs for 15-year fixed-rate mortgages, a popular option for homeowners refinancing, saw a slight decrease, dropping to 6.71% from 6.73% last week. A year ago, these rates stood at 5.52%.

Mortgage rates are influenced by a combination of factors including inflation, Federal Reserve policy, and market expectations for the economy. They tend to follow the yield on the 10-year Treasury note, a key benchmark for lenders.

Since late February, mortgage rates have been on an upward trend, coinciding with increased oil prices and rising inflation, partly attributed to geopolitical tensions. This period has also seen heightened volatility in the bond market, driving up Treasury yields.

Impact on Housing Market

The sustained high mortgage rates have significantly stalled U.S. home sales throughout the year. The increased monthly costs associated with higher rates limit the purchasing power of potential buyers, leading many to postpone their home-buying decisions. The housing market has been in a slump since 2022, when rates began to rise from pandemic-era lows.

Last year, sales of previously occupied homes were flat, remaining at a 30-year low. While existing home sales saw a slight increase in September compared to the previous month, they slowed year-over-year, reflecting the persistent impact of rising mortgage rates and home prices.

The 10-year Treasury yield, which had previously climbed above 5.30% amid concerns about inflation and economic strength, pulled back to 5.10% by Thursday afternoon. Despite this pullback, the yield remains substantially higher than its 3.97% level prior to late February.

The increase in the average 30-year fixed-rate mortgage from a low of 5.98% in late February translates to an approximate additional monthly cost of $376 for a borrower financing a $400,000 home loan at current rates.