Average rate on a 30-year mortgage climbs for the first time since late May to just under 7%
LOS ANGELES — The average interest rate on a 30-year mortgage rose this week, pushing up the cost of borrowing a mortgage for the next 30 years. for the first time since the end of May.
The rate rose to 6.95% from 6.86% last week, mortgage buyer Freddie Mac said Wednesday. A year ago, the rate averaged 6.81%.
The increase follows a four-week decline in the average rate, which has largely hovered around 7% this year.
If interest rates rise, they can adding hundreds of dollars per month in fees for borrowersHigh mortgage rates have put a major damper on home sales, which have been in a slump since 2022.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their mortgages, also rose this week, pushing the average rate to 6.25% from 6.16% last week. A year ago, the average was 6.24%, according to Freddie Mac.
Mortgage rates are influenced by several factors, including the bond market’s reaction to the Federal Reserve’s interest rate policy and the movement in the 10-year Treasury yield, which lenders use as a guide in setting mortgage prices.
The yield, which hit 4.7% in late April, has generally fallen since then on hopes that inflation will ease enough to prompt the Fed to cut its key interest rate, which is at its highest level in more than two decades.
Fed officials have said inflation has moved closer to the Fed’s target of 2% in recent months and have signaled they expect to cut the central bank’s benchmark interest rate once this year.
But until the Fed cuts short-term rates, long-term mortgage rates are unlikely to fall from current levels.
Most economists expect the Fed’s first rate cut to come in September, with another cut possible by the end of the year. But mortgage rates could start to fall in the coming weeks as bond yields fall in anticipation of a Fed rate cut, said Lisa Sturtevant, chief economist at Bright MLS.
“While today’s report is not what homebuyers were hoping for, we may see interest rates fall sooner than expected,” she said.
Mortgage rates fell to historic lows during the pandemic, sparking a home-buying boom that sent home prices soaring. Between 2019 and 2023, the median national sales price of previously occupied U.S. homes rose more than 43%. And despite the decline in sales this year, home prices hit a record high of $419,300 in May.
High mortgage costs and record home prices have scared off many potential homebuyers this spring, traditionally the busiest time of year for the housing market.
Sales of previously occupied American homes fell for the third consecutive month in May, and there are indications that there was also a relapse in June.
Most economists predict that the average rate on a 30-year mortgage will remain above 6% this year. That’s still double the average rate just three years ago.
“We continue to expect rates to decline modestly in the second half of the year and given the additional inventory, price growth will moderate, which bodes well for interested home buyers,” said Sam Khater, chief economist at Freddie Mac.