The cost of borrowing for a 15-year fixed mortgage has also escalated, climbing from 5.71% to 5.99% this week. A year prior, the average for this mortgage type stood at 7.03%, making the current rates a notable change for homeowners considering refinancing.
Rising mortgage rates can significantly impact monthly payments, potentially adding hundreds of dollars in costs for borrowers. This increase comes at a time when home prices are nearing record highs, further reducing the purchasing power of prospective buyers amid a housing market still recovering from a sales slump that began in 2022.
The last time the 30-year mortgage rate was this high was on August 1, when it hit 6.73%. Multiple factors influence mortgage rates, including fluctuations in the bond market, Federal Reserve interest rate policies, and economic indicators related to inflation. The yield on the 10-year Treasury note, which serves as a benchmark for mortgage pricing, was at 4.30% on Thursday afternoon, up from 3.62% in mid-September.
The recent increase in Treasury yields has coincided with a series of positive economic reports, including a rise in consumer confidence that exceeded economists’ expectations and a slight dip in job openings in September, though job placements remained stable. Analysts are closely watching the upcoming government jobs report for October; a robust report could lead to further increases in bond yields.
Sam Khater, Freddie Mac’s chief economist, noted, “With several potential turning points on the horizon, including next week’s jobs report, the 2024 elections, and Federal Reserve interest rate decisions, we expect mortgage rates to remain volatile. While uncertainty persists, it appears that mortgage rates have peaked, and we do not expect them to reach the highs seen earlier this year.”
In May, the average rate for a 30-year mortgage peaked at 7.22%, making the current rate of 6.72% a notable decline. By the end of September, rates had dipped to 6.08%, marking the lowest point in two years.
Economists predict that mortgage rates will continue to fluctuate throughout the year but expect a general decline in 2025. This potential decrease could improve what homebuyers are able to afford, although an influx of buyers entering the market could also lead to rising home prices.
