The average long-term U.S. mortgage rate rose again this week, reflecting ongoing bond market volatility over the war with Iran.
The benchmark 30-year fixed-rate mortgage rate ticked to 6.11% from 6% last week, mortgage broker Freddie Mac said Thursday. A year ago, the rate averaged 6.65%.
The average price has now returned to where it was five weeks ago. Just two weeks ago, it hit its lowest level in three and a half years. It’s hovered around 6% this year, an encouraging backdrop for potential home buyers who can afford to buy at current prices as the spring home-buying season begins.
Meanwhile, the cost of borrowing a 15-year fixed-rate mortgage, which is popular with homeowners refinancing their home loans, also rose this week. This average rate increased to 5.5% from 5.43% last week. A year ago, it was at 5.8%, Freddie Mac said.
Mortgage rates are affected by many factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. They typically track the 10-year Treasury yield, which lenders use as a guide for pricing home loans.
The 10-year Treasury yield was at 4.25% Thursday afternoon, up from around 4.13% a week ago.
Treasury yields have risen recently as rising oil prices fuel fears of higher inflation. The concern was amplified last month by a surprisingly weak report on hiring by US employers and a relatively stable snapshot of consumer inflation taken before the start of the Iran war.
“Under normal circumstances, this soft economic reading would put downward pressure on mortgage rates, however, the Middle East news is overriding these signals,” Hannah Jones, senior research analyst for economics at Realtor.com, said in an email.
Higher oil prices can put pressure on inflation, which could keep the Federal Reserve from cutting interest rates.
The central bank does not set mortgage rates, but decisions to raise or lower short-term rates are closely watched by bond investors and can ultimately affect the 10-year Treasury yield, which affects mortgage rates.
The US housing market remains in decline until 2022, when mortgage rates begin to rise from pandemic-era lows.
Sales of previously occupied U.S. homes have been nearing an annual pace of 4 million now heading back to 2023 — far short of the 5.2 million annual pace that has historically been the norm. They fell to a 30-year low last year and have remained sluggish so far this year, falling from their year-over-year lows in January and February even as mortgage rates are lower than last year.
