The average long-term US mortgage rate rose this week to just under 7%, marking another challenge for potential homebuyers already grappling with affordability concerns within a housing market constrained by a shortage of available homes for purchase.
Currently, the average long-term US mortgage rate for a 30-year mortgage surpasses double the rate from two years prior, when it stood at a mere 2.87%. (Photo: Tim and Julie Harris)
Average Long-Term US Mortgage Rate Hits 6.96%
Mortgage buyer Freddie Mac announced on Thursday that the average long-term US mortgage rate on the benchmark 30-year home loan ascended to 6.96%, up from 6.90% the prior week. This time last year, the rate averaged 5.22%, a published article reported.
This marks the third consecutive weekly rise in the average long-term US mortgage rate, coinciding with its peak for the year that was initially reached on July 13. Elevated rates have the potential to add hundreds of dollars to monthly expenses for borrowers, further restricting their purchasing power within a market that is already beyond the means of numerous Americans.
Sam Khater, Chief Economist at Freddie Mac, commented, “There is no doubt that sustained high rates will extend affordability challenges beyond initial expectations, particularly in light of resurging home prices. However, the upward push on rates stems from a robust economy featuring low unemployment and robust wage growth. This historical context has consistently maintained solid demand for home purchases.”
Currently, the average long-term US mortgage rate for a 30-year mortgage surpasses double the rate from two years prior, when it stood at a mere 2.87%. Those historically low rates induced a surge in both home sales and refinancing activities. Nevertheless, the stark elevation in rates at present contributes to a scarcity of available homes.
Homeowners who previously secured mortgages with lower interest rates are now hesitant to sell their properties and enter into new acquisitions at higher interest rates.
The insufficient supply of housing units is a pivotal factor accounting for a 23% decline in home sales during the first half of this year.
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Average Long-Term US Mortgage Rate
This recent surge in average long-term US mortgage rate follows an uptick in the 10-year Treasury yield, which surged to 4.19% last week, marking its highest point since the beginning of November.
As of midday trading on Thursday, the yield rested at 4.02%.
Amidst high inflation, the Federal Reserve has executed 11 benchmark interest rate hikes since March 2022, propelling the fed funds rate to its most elevated standing in 22 years. Inflation rates have consistently declined since last summer, leading many analysts to speculate that the Fed has concluded its series of rate hikes.
While average long-term US mortgage rates may not directly mirror the Fed’s rate increments, they generally correspond with fluctuations in the 10-year Treasury note yield.
The average long-term US mortgage rate for 15-year fixed-rate mortgages, a popular option among those seeking to refinance their homes, climbed to 6.34% from 6.25% the prior week. In contrast, during the same period a year ago, the average stood at 4.59%, according to Freddie Mac.
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