Average long-term US mortgage rates held steady this week, with the benchmark 30-year fixed-rate loan unchanged at 7.40%, mortgage buyer Freddie Mac said Thursday. The pause ends seven straight weeks of increases, but it leaves mortgage rates at their highest level in nearly three years, keeping homebuying costs elevated for millions of Americans.
One year ago, the average 30-year rate stood at 6.27%, more than a percentage point below today’s level. The latest reading marks the highest average since November 16, 2023, when the benchmark sat at 7.44% — meaning mortgage rates are now hovering just below a three-year peak that few economists expected to revisit.
Meanwhile, borrowing costs on 15-year fixed-rate mortgages, a popular option for borrowers refinancing a home loan, eased slightly this week. That average slipped to 6.71% from 6.73% last week, Freddie Mac said. A year ago, the 15-year average was 5.52%.
Mortgage rates pause after seven weeks of increases
The breather came as the 10-year Treasury yield pulled back from its highest level since 2002. The yield stood at 5.10% at midday Thursday on the bond market, after topping 5.30% earlier this month amid worries about high inflation and signals of a strong US economy. Mortgage rates generally follow the trajectory of the 10-year yield, which lenders use as a guide to pricing home loans.
Still, the yield remains far above its 3.97% level from before the US war with Iran began in late February, and analysts say borrowing costs are unlikely to fall meaningfully while inflation and bond-market volatility stay elevated.
The recent string of increases snapped only because the 10-year yield pulled back from its highs. Analysts caution that any renewed climb in Treasury yields — driven by stronger economic data or fiscal worries — could quickly push borrowing costs back up. The bond market remains on edge over high inflation, large government debt loads and the uncertain path of Fed policy.
Refinancing activity, meanwhile, has collapsed to a fraction of its pandemic-era levels. With most existing homeowners locked into rates far below current levels, few have any incentive to refinance, and the so-called lock-in effect continues to choke the supply of homes for sale — compounding the affordability crunch for first-time buyers.
Builder sentiment has wobbled as well, with construction firms offering rate buydowns and other incentives to keep buyers interested. But economists note that such sweeteners can only do so much when the benchmark rate sits more than a percentage point above last year’s level.
For savers, the picture is brighter: higher yields have lifted returns on savings accounts and money-market funds. But for anyone hoping to buy a home, the maths keeps getting harder — and economists see little on the calendar that would change it soon.
Rates on home loans are influenced by inflation, Federal Reserve policy and bond-market investors’ expectations for the economy, among other factors. With the Fed now raising rates again under Chair Kevin Warsh and September inflation running at 3.7%, the forces pushing mortgage rates higher have not gone away.
Mortgage rates keep buyers on the sidelines
US home sales remain stalled this year in large part because of rising borrowing costs. Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers’ purchasing power and prompting many to put off buying a home.
The run-up in rates began in late February, when the war with Iran pushed up the price of oil and drove inflation higher. Surging energy costs have since fed through to consumer and producer prices, and the resulting bond-market volatility has pushed yields on US Treasurys — and with them, mortgage rates — steadily upward.
Economists say the housing market is unlikely to thaw until borrowing costs come down or incomes catch up. For now, with mortgage rates parked at a near-three-year high and the Fed signalling more tightening may be needed, prospective buyers face little relief on the horizon.
Housing analysts will watch next week’s Freddie Mac survey for any sign that the seven-week climb has truly ended. But with Treasury yields still near multi-decade highs and inflation proving stubborn, the era of cheap home loans looks further away than ever.