The average rate for a 30-year fixed-rate mortgage in the U.S. has climbed to 7.28%, its highest point in nearly three years, according to Freddie Mac. This represents the sixth consecutive week of increases for mortgage rates. Last week, the average rate stood at 7.03%, and a year ago it was 6.34%.
The current average rate is the highest recorded since November 22, 2023, when it reached 7.29%. Borrowing costs for 15-year fixed-rate mortgages also saw an increase, rising to 6.60% from 6.42% last week. A year ago, the 15-year rate was 5.55%.
These rising rates significantly increase the monthly cost for borrowers. An increase of approximately one percentage point, as seen since late February, can add about $276 per month to the financing cost of a $400,000 home loan. This escalation in borrowing costs has contributed to a slowdown in the U.S. housing market, which has been described as being in a rut for much of the year.
Mortgage rates are influenced by a combination of factors including inflation, Federal Reserve policy, and the expectations of bond market investors. Typically, they track the 10-year Treasury yield. Expectations of higher inflation, coupled with surging oil prices, have pushed the 10-year Treasury yield upward. This yield has risen from 3.97% in late February to 5.27% in recent trading, a level not seen since 2007, prior to the financial crisis.
High yields can slow the broader economy by making borrowing more expensive across the board and can depress investment prices. The U.S. housing market has experienced a slump since 2022, when mortgage rates began to rise from pandemic-era lows. Sales of previously occupied homes remained flat last year, at a 30-year low. In August, existing home sales fell 2% from July, reaching a seasonally adjusted annual rate of 3.98 million units, the slowest pace in over a year.
