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Average U.S. mortgage rate jumps to 7.28%, highest in nearly three years
ReAverage U.S. mortgage rate jumps to 7.28%, highest in nearly three years
The 30-year fixed mortgage rate rose to 7.28% this week, its highest level since November 2023, as rising Treasury yields and inflation expectations tied to surging oil prices push borrowing costs higher and squeeze homebuyers.
The average long-term U.S. mortgage rate climbed to 7.28% this week, its highest level in nearly three years, as rising bond yields and inflation fears tied to surging oil prices push borrowing costs higher and further strain the housing market.
Freddie Mac said the benchmark 30-year fixed-rate mortgage rose from 7.03% last week, the biggest weekly jump in several years. A year ago, the average stood at 6.34%. It was the sixth consecutive weekly increase and the highest reading since Nov. 22, 2023, when the rate reached 7.29%.
Borrowing costs on 15-year fixed-rate mortgages, often used by homeowners refinancing, also rose. That average increased to 6.60% from 6.42% a week earlier. A year ago, it was 5.55%.
The sharp rise adds hundreds of dollars a month to borrowers' costs and limits purchasing power. Since late February, when the 30-year average briefly dipped to 5.98%, its lowest level since late 2022, the roughly one percentage point increase translates into about $276 more per month for a borrower financing a $400,000 home loan at the current average rate. Depending on income, credit and other factors, borrowers may qualify for rates below or above the average.
Mortgage rates are influenced by inflation, Federal Reserve policy and bond-market investors' expectations for the economy. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. Expectations of higher inflation amid surging oil prices have pushed the 10-year Treasury yield up from 3.97% in late February, before the U.S. and Israel attacked Iran, to 5.27% in midday trading Thursday. That puts it roughly back to where it was in 2007, on the eve of the real estate-induced financial crisis.
High yields slow the overall economy by making it more expensive for everyone to borrow money, while undercutting prices for stocks and other investments.
The U.S. housing market has been in a slump since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied homes were essentially flat last year, stuck at a 30-year low. Last month the National Association of Realtors said existing home sales fell 2% in August from July to a seasonally adjusted annual rate of 3.98 million units, their slowest annual pace in more than a year.
Many potential homeowners are now hitting the brakes. Mortgage applications, which include loans to buy a home or refinance an existing mortgage, tumbled 6% last week from the previous week, according to the Mortgage Bankers Association. That marked the fourth straight weekly drop. Applications for loans to refinance existing mortgages also declined.
The elevated rates are driving more prospective homebuyers to adjustable-rate mortgages, or ARMs. Such loans, which typically offer lower initial interest rates than traditional 30-year, fixed-rate mortgages, accounted for more than 10% of all mortgage applications last week, the MBA said.
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