According to mortgage buyer Freddie Mac, the benchmark 30-year fixed-rate mortgage averaged 6.53% this week, up slightly from 6.51% a week earlier. Despite the latest increase, the average rate remains below the 6.89% level recorded a year ago.
Higher Rates Increase Monthly Housing Costs
When mortgage rates rise, they can add hundreds of dollars a month to borrowing costs, reducing purchasing power for homebuyers and making homeownership more expensive.
The increase continues a trend that has seen rates move mostly higher since the war with Iran began. The conflict has disrupted the passage of tankers transporting crude oil through the Persian Gulf to customers around the world, pushing oil prices sharply higher.
Higher oil prices are considered a key driver of inflation, and inflation expectations play a significant role in determining mortgage rates.
Bond Yields and Inflation Expectations Drive Mortgage Rates
Mortgage rates are influenced by several factors, including Federal Reserve interest-rate policy decisions and bond market investors’ expectations for economic growth and inflation.
They generally follow the direction of the 10-year Treasury yield, which lenders use as a guide when pricing home loans.
As expectations for higher oil prices have increased, long-term bond yields have also moved higher. That rise in bond yields has contributed to the recent increase in mortgage rates.
Housing Market Faces Another Obstacle
The latest rise in mortgage rates represents another setback for prospective buyers already facing affordability challenges. With borrowing costs continuing to increase, higher monthly payments can limit purchasing power and make it more difficult for buyers to qualify for homes within their budget.
The average 30-year fixed mortgage rate now stands at 6.53%, the highest level in nine months, reflecting the impact of rising bond yields and growing concerns that higher energy prices could fuel inflation in the months ahead.
