US Mortgage Rates Rise to Highest Since Early July, Suppressing Demand

WASHINGTON — The average rate on a 30-year mortgage in the U.S. rose for the third straight week to its highest level since mid-July, reflecting a recent jump in the bond yields that lenders use as a guide to price home loans. The rate rose to 6.85% from 6.72% last week, mortgage buyer Freddie Mac said Thursday. One year ago, the rate on a 30-year mortgage averaged 6.61%.

The average rate on a 30-year mortgage is now the highest it’s been since the week of July 11, when it was at 6.89%. It dipped as low as 6.08% in September — a 2-year low — and as high as 7.22% in May. Most economists forecast the average rate on a 30-year mortgage to remain above 6% next year, with some including an upper range as high as 6.8%. That range would be largely in line with where rates have hovered this year.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan at a lower rate, also rose this week. The average rate increased to 6% from 5.92% last week. A year ago, it averaged 5.93%, Freddie Mac said.

Elevated mortgage rates and rising home prices have kept homeownership out of reach of many would-be homebuyers. While sales of previously occupied U.S. homes rose in November for the second straight month, the housing market remains in a slump and on track for its worst year since 1995.

Mortgage rates are influenced by several factors, including the moves in the yield on U.S. 10-year Treasury bonds. Bond yields climbed last week after the Federal Reserve signaled that it will likely deliver fewer cuts to rates next year than it forecast just a few months ago. While the central bank doesn’t set mortgage rates, its actions and the trajectory of inflation influence the moves in the 10-year Treasury yield.

The yield, which was below 3.7% as recently as September, was at 4.61% in midday trading Thursday.



The rise in mortgage rates comes as the housing market continues to struggle with affordability issues. Higher interest rates make it more expensive for buyers to finance their purchases, while rising home prices have further strained the budgets of potential homeowners. The combination of these factors has led to a decrease in demand for housing, as fewer buyers can afford to enter the market.

The impact of higher mortgage rates on the housing market is significant, as it affects both the demand for new homes and the ability of existing homeowners to refinance their mortgages. As rates rise, the cost of borrowing increases, making it more difficult for buyers to qualify for loans and afford their monthly payments. This, in turn, can lead to a decrease in demand for new homes and a slowdown in the housing market.



In conclusion, the recent rise in mortgage rates to their highest level since early July has further suppressed demand in the U.S. housing market. As interest rates and home prices continue to rise, affordability remains a significant challenge for potential homebuyers. The Federal Reserve's policy changes, particularly its retreat from purchasing mortgage-backed securities and changes in expected prepayment speeds of newly originated MBSs, have directly influenced the recent rise in mortgage rates. The bond market, particularly the 10-year Treasury yield, has also played a significant role in the increase of mortgage rates. As changes in inflation expectations and economic growth prospects contribute to the rise in mortgage rates, homeowners and potential buyers must remain vigilant and adapt to the evolving market conditions.