U.S. Mortgage Rates Reach Highest Level in a Year
The average long-term U.S. mortgage rate has risen for four straight weeks, now reaching its highest point in a year. This represents a significant hurdle for potential homebuyers who had hoped for a respite from high borrowing costs. The 30-year fixed-rate mortgage rate climbed to 6.66% from last week’s 6.58%, according to Freddie Mac. A year ago, it was at 6.72%.
Increased mortgage rates mean added monthly expenses for borrowers, reducing their purchasing power. As rates continue to rise, many prospective buyers may postpone purchasing homes, contributing to sluggish U.S. home sales this year. Additionally, the 15-year fixed-rate mortgage, commonly chosen by those refinancing, also saw an increase this week, going from 5.96% to 6.04%. At this time last year, the rate was 5.85%.
Mortgage rates are affected by a variety of factors, including the Federal Reserve’s interest rate decisions and bond market expectations for the economy and inflation. Typically, they follow the trend of the 10-year Treasury yield, used by lenders to price home loans.
This year, rates have mainly been on the rise due to the impact of the conflict in Iran, which has driven oil prices upward and led to expectations of increased inflation. This development has elevated long-term bond yields from their pre-conflict levels in late February, causing an upward trend in mortgage rates.
The 10-year Treasury yield stood at 4.66% on Thursday afternoon in the bond market, up from 3.97% in late February, before the conflict started. The current average rate for a 30-year mortgage is the highest since July 31, 2025, when it matched the present figure of 6.72%. Earlier this year, the average rate briefly dipped below 6%, marking the first instance of such a decline since late 2022.
This latest rate increase follows the Federal Reserve’s recent decision to maintain its key interest rate, as the bank navigates continuous inflation challenges. Although the Fed does not directly set mortgage rates, its short-term rate decisions are closely monitored by bond investors, ultimately impacting the 10-year Treasury yields.
Despite being lower than rates from the past year, the recent upward trend has dampened home sales. Sales of previously owned homes were up by 0.7% from January to June compared to last year, but they remain near a 4-million annual pace, well below the historic norm of 5.2-million.
This trend mirrors the national housing market slump that started in 2022, when mortgage rates began rising from the pandemic-era lows. Last year, sales of previously owned homes remained flat at a 30-year low.