Average Rate on 30-Year Mortgage in the U.S. Rises to Highest Level in 8 Weeks

The average rate on a 30-year mortgage in the U.S. has increased for the third consecutive week, reaching 6.44%, the highest level since late August. This marks a rise from last week’s rate of 6.32% and is significantly lower than the 7.63% average rate seen a year ago.

The last recorded peak was on August 22, when the average mortgage rate was 6.46%. Various factors influence mortgage rates, including the bond market’s response to the Federal Reserve’s interest rate decisions. The yield on the 10-year Treasury, which lenders use as a pricing guide for home loans, was reported at 4.09% on Thursday, up from 3.62% in mid-September, shortly before the Fed reduced its benchmark lending rate.

The average mortgage rate had previously reached its lowest point in two years at 6.08% three weeks ago. However, it remains below the 2024 peak of 7.22% recorded in May. Recent economic reports, such as a stronger-than-expected jobs report for September and updates on consumer prices, have contributed to the recent increase in mortgage rates.

According to Ralph Mclaughlin, senior economist at Realtor.com, “While we expect the long-run trend in mortgage rates to be downward, recent weeks have brought volatility.” Higher mortgage rates can indicate economic strength, which typically supports the housing market. However, these rising rates can also increase borrowing costs by hundreds of dollars per month, limiting the purchasing power of homebuyers amid historically high housing prices.

This upward trend in mortgage rates may discourage homeowners with lower locked-in rates from listing their homes for sale, as they would face higher rates on new loans. The housing market has struggled since 2022, with elevated mortgage rates deterring many potential buyers. In August, sales of previously occupied homes declined, even as mortgage rates began to ease.

The recent increase in mortgage rates appears to have already affected demand, with mortgage applications dropping 17% last week compared to the previous week, according to the Mortgage Bankers Association. Applications for mortgage refinancing saw a significant 26% decline, although they remain more than double the levels seen a year ago when rates were higher.

For 15-year fixed-rate mortgages, popular among homeowners refinancing, the average rate rose to 5.63%, up from 5.41% the previous week. A year ago, the average rate for this mortgage type was 6.92%.

Economists anticipate that mortgage rates will remain close to current levels for the rest of the year. Fannie Mae projects that the average rate on a 30-year mortgage will be around 6.2% in the final quarter of 2024, potentially declining to an average of 5.7% in the same period next year.