WASHINGTON, September 24 — The weekly average rate on a 30-year fixed-rate home loan has been climbing for months, and last week it reached 6.76%, its highest level in over 14 months, according to mortgage buyer Freddie Mac. Freddie Mac’s latest snapshot is due out at midday Thursday, and it is expected to show the average rate rose again this week, moving closer to 7%. Other mortgage trackers have already shown the average rate on a 30-year mortgage rising to just below or above 7% in recent days.
For buyers, that is not a rounding error. Higher mortgage rates can add hundreds of dollars a month to borrowers’ costs, limiting homebuyers’ purchasing power.
As rates rise, that can also lead prospective home shoppers to delay buying.
A market stuck in a rut
The housing market has been stuck in a rut this year in large part because of rising borrowing costs, as mortgage rates have kept marching higher in the months since the war between the U.S. and Iran began in late February. Expectations of higher inflation amid surging oil prices have pushed up the long-term bond yields that lenders use as a guide to pricing home loans, driving mortgage rates higher. Mortgage rates are influenced by inflation, Federal Reserve policy and bond-market investors’ expectations for the economy, among other factors.
They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. That yield, which was at 3.97% in late February, before the war began, breached 5% on Monday for the first time since 2023.
The Fed’s move
Meanwhile, the Federal Reserve’s decision Wednesday to increase its key interest rate for the first time in three years in a bid to tame surging inflation could also put upward pressure on mortgage rates. While the central bank doesn’t set mortgage rates, its decisions to raise or lower its short-term rate are watched closely by bond investors and can ultimately affect the yield on 10-year Treasurys. The Fed also signaled Wednesday that another rate hike could occur later this year.
The rate hike all but guarantees that mortgage rates will remain stuck at or above the 7% threshold, which creates a psychological and financial barrier for buyers. What to watch next is Thursday’s Freddie Mac snapshot at midday, the first hard reading on whether the 30-year average has crossed the 7% line — and whether buyers, already squeezed, step back further.
