The average rate on a 30-year mortgage in the U.S. has risen to 6.86%, its highest level since mid-February, posing a setback for home shoppers and potentially slowing down sales during the spring homebuying season.
The big picture: The increase represents a rise from the previous rate of 6.81% and a decrease from the rate of 6.94% a year ago, as reported by mortgage buyer Freddie Mac.
- Borrowing costs for 15-year fixed-rate mortgages, often preferred by homeowners refinancing their loans, also saw a rise to 6.01% from 5.92% last week, though down from 6.24% a year ago.
- Various factors drive these rate increases, including global demand for U.S. Treasurys, the Federal Reserve’s interest rate policy decisions, and bond market investors’ expectations about the economy and inflation.
- The 30-year mortgage rate has hovered near its yearly high of just above 7% set in mid-January. It temporarily dropped to 6.62% five weeks ago but now stands at its highest level since February 13, averaging 6.87%.
Zoom in; The recent uptick in mortgage rates aligns with movements in the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans.
- The 10-year Treasury yield had fallen after reaching around 4.8% in mid-January, only to rise again amid concerns over the U.S.-China trade war and Moody’s reduction of the U.S. credit rating over federal government debt concerns.
- The increase in mortgage rates is having a dampening effect on homebuyer demand, with a 5.1% decline in mortgage applications from a week earlier due to increased borrowing costs, although applications for home purchase loans were still 13% higher than a year ago.
- Economists anticipate continued volatility in mortgage rates in the coming months, with forecasts indicating that the average 30-year mortgage rate is expected to stay between 6% and 7% throughout the year.
