WASHINGTON (AP) — The average rate on a 30-year mortgage in the U.S. rose for the second week in a row to the highest level since mid-July, reflecting a recent jump in bond yields that lenders use as a guide for pricing. home loans.
Interest rates rose to 6.85% from 6.72% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the average interest rate on a 30-year mortgage was 6.61%.
The average interest rate on a 30-year mortgage is now the highest since the week of July 11, when it was 6.89%. In September, rates fell to 6.08% – a two-year low – and to 7.22% in May.
Most economists predict that the average interest rate on a 30-year mortgage will remain above 6% next year, with some economists putting an upper limit as high as 6.8%. That range would be largely in line with where rates have fluctuated this year.
Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners looking to refinance their home loans at a lower interest rate, also rose this week. The average rate rose to 6% from 5.92% last week. A year ago, this averaged 5.93%, Freddie Mac said.
Higher mortgage rates and rising home prices have put homeownership out of reach for many potential homebuyers. While sales of previously occupied U.S. homes rose for the second straight month in November, the housing market remains in a slump and is on track for its worst year since 1995.
Mortgage rates are affected by several factors, including movements in 10-year U.S. Treasury yields.
Bond yields rose last week after the Federal Reserve indicated it is likely to make fewer rate cuts next year than forecast just a few months ago. Although the central bank does not set mortgage rates, its actions and the trajectory of inflation influence movements in 10-year Treasury yields.
The biggest question mark for mortgage rates next year is whether newly elected President Donald Trump’s policy initiatives will contribute to higher inflation and increase the national debt, which could keep mortgage rates high. That’s because what happens with inflation, the U.S. budget deficit and the economy can have an effect on 10-year Treasury yields.
The return, which was still below 3.7% in September, was 4.61% during afternoon trading on Thursday.
