The average U.S. long-term mortgage rate climbed to 6.58% according to mortgage buyer Freddie Mac, reaching its highest level in nearly 12 months and adding hundreds of dollars in monthly costs for prospective homebuyers facing a sluggish summer housing market.
30-Year Fixed Mortgage Rates Climb for Third Straight Week
The benchmark 30-year fixed-rate mortgage rose to 6.58% according to Freddie Mac, up from 6.55% the previous week. This marks the third week that rates have ticked higher, though the average remains below the 6.74% rate recorded one year ago. Borrowing costs on 15-year fixed-rate mortgages also increased, rising to 5.96% from 5.93% the prior week, compared to 5.87% a year ago.
Higher borrowing costs have weighed on purchasing power throughout the year. According to Lisa Sturtevant, chief economist at Bright MLS, the squeeze extends beyond financing rates alone. Home prices hit record highs across many U.S. markets over the summer, while rising gas prices and inflation concerns compounded financial strain for buyers.
Crude Oil Prices and Treasury Yields Drive Rate Increases
Mortgage rates generally follow the trajectory of the 10-year Treasury yield, which lenders use to price home loans. The 10-year Treasury yield reached 4.7% at midday on the bond market, up from 4.57% the previous week, according to market data. That yield sat at 3.97% in late February before the conflict in Iran began.
The escalation of violence in Iran pushed crude oil prices sharply higher, stoking expectations of hotter inflation and driving up long-term bond yields. While a recent report showing prices paid by consumers for gas, clothes and other goods cooled last month could help take pressure off the Federal Reserve, Hannah Jones, senior economist at Realtor.com, noted that buyers continue to feel the pinch of stubbornly high borrowing costs until mortgage rates follow suit.
Housing Market Slump Extends Through the Summer
The upward trajectory of borrowing costs has contributed to a sluggish housing market. Pending U.S. home sales fell 5.4% in June from the previous month and dropped 0.3% from June of the prior year, according to the National Association of Realtors. Because pending sales track contracts signed a month or two before a sale is finalized, the figures serve as a near-term bellwether for the market.
Mortgage applications also reflected the cooling buyer demand. According to the Mortgage Bankers Association, overall mortgage applications fell 2.7% last week, driven primarily by a 7% drop in applications specifically for purchasing a home. Sales of previously occupied U.S. homes remain stuck near a 4-million annual pace, far short of the historic norm of 5.2 million, extending a national housing slump that began when rates started climbing from pandemic-era lows in 2022.
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