An Overview of the Rising 30-year Mortgage Rates
The average 30-year mortgage rate in the U.S. has marked its third consecutive week of rise, reaching its highest point since mid-July, based on the recent surge in bond yields that lenders rely on for pricing home loans.Discover more about bond yields.
As per Freddie Mac, a leading mortgage buyer, the rate has gone up to 6.85% from 6.72% last week. A year ago, the average 30-year mortgage rate stood at 6.61%.
The Historical Performance of the 30-year Mortgage Rate
The current rate is the highest since the week of July 11, where it peaked at 6.89%. The rate had dropped to a two-year low of 6.08% in September and had reached a high of 7.22% in May.
Majority of economists predict that the average 30-year mortgage rate will continue to stay above 6% next year, with some anticipating a peak of as much as 6.8% — a trend that aligns with the rates seen this year.
The Impact on 15-year Fixed-Rate Mortgages and Homeownership
The borrowing costs on 15-year fixed-rate mortgages, a popular choice among homeowners looking to refinance their loans at a lower rate, also experienced an uptick this week, with the average rate increasing to 6% from 5.92% last week. Freddie Mac reported an average of 5.93% a year ago.
Higher mortgage rates coupled with rising home prices have hindered many potential homebuyers from becoming homeowners. Even though sales of previously owned U.S. homes rose in November for the second month in a row, the housing market remains sluggish, and is on track for its worst performance since 1995.
Factors Influencing Mortgage Rates
Mortgage rates are swayed by multiple factors, including fluctuations in the yield on U.S. 10-year Treasury bonds.Learn more about Treasury bonds.
Last week saw an increase in bond yields following the Federal Reserve’s indication that it will likely implement fewer cuts to rates next year than it had anticipated a few months back. Although the central bank does not directly set mortgage rates, its actions and inflation trends significantly affect the shifts in the 10-year Treasury yield.
The yield, which was below 3.7% as recent as September, stood at 4.61% during midday trading on Thursday.
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