The average rate on a 30-year mortgage in the United States rose to 6.12% this week, the first increase in seven weeks.
The rate increased from 6.08% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.49%.
Last week, the average rate fell to a two-year low, increasing the purchasing power of homebuyers as they navigate a housing market with prices near all-time highs.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners looking to refinance their home loan at a lower rate, rose again this week. The average rate rose to 5.25% from 5.16% last week. A year ago, it averaged 6.78%, Freddie Mac said.
Mortgage rates are influenced by several factors, including how the bond market reacts to interest rate policy decisions by the Federal Reserve. That can change the trajectory of the 10-year Treasury yield, which lenders use as a guide in pricing home loans. The 10-year Treasury yield was at 3.82% on Thursday, up from 3.78% last week.
The average rate on a 30-year mortgage is down from 7.22% in May, its 2024 peak. Rates have mostly fallen since July in anticipation of last month’s decision by the Federal Reserve to cut its main interest rate for the first time in more than four years.
Fed officials also said they expect further cuts this year as well as in 2025 and 2026. The rate cuts should, over time, lead to lower borrowing costs on loans mortgages.
Aside from the rise in the long-term average rate this week, Freddie Mac chief economist Sam Khater painted a more optimistic picture for potential homebuyers.
“Looking at the big picture, mortgage rates have fallen a point and a half over the past 12 months, house price growth is slowing, inventory is rising and incomes continue to rise,” he said. Khater said. “As a result, the environment for homebuyers is improving this fall and is expected to continue through the remainder of the year.”
The average rate on a 30-year mortgage rose from less than 3% in September 2021 to a 23-year high of 7.8% last October. This coincided with the Fed raising its benchmark interest rate to combat inflation.
When mortgage rates rise, they can add hundreds of dollars per month to costs for borrowers. The real estate market has seen a decline in sales since 2022, as high mortgage rates have discouraged many potential buyers. Sales of previously occupied U.S. homes fell in August even as mortgage rates began to ease.
Economists generally expect mortgage rates to remain near current levels, at least this year. Fannie Mae projects that the rate on a 30-year mortgage will average 6.2% in the October-December quarter and drop to an average of 5.7% in the same quarter next year.
