In late September, there was a moment when mortgage rates, which had been going on for months, looked like they were going to be low enough to make buyers and sellers think twice.
But that window is closed, at least for now.
The average interest rate on 30-year mortgages, the most popular mortgage in the United States, rose to 6.93% this week, the highest level since early July, Freddie Mac said Thursday.
Mortgage rates tend to be tied to 10-year Treasury yields, which are a combination of debt and debt resulting from a series of strong economic indicators, sustained inflation, and government-proposed tax and spending policies. It is rising due to a potential increase in the deficit. The next Trump administration.
“The economy is doing well and inflation hasn't fallen as much as people expected,” said Stein van Neuerburg, a real estate and finance professor at Columbia University.
This week, the 10-year Treasury yield rose to its lowest level in months due to a variety of factors, including data showing the U.S. services sector expanded in December and President-elect Donald J. Trump reiterating plans for tariffs on a wide range of imports. extended the rise. , many economists said there would be inflation. Yields on ten government bonds briefly exceeded 4.7% on Wednesday, the highest level since April.
Inflation has proven stubborn recently, indicating that the Federal Reserve has not yet won the battle against rapid price increases. The Federal Reserve began lowering interest rates last year from multi-decade highs as officials try to rein in stubborn inflation. The central bank cut interest rates three times last year, but has only hinted at two cuts this year as inflation persists.
Mortgage rates are rising even though the Federal Reserve has lowered short-term interest rates. The main reason for this discrepancy is that long-term interest rates, including those for mortgages, set by the market reflect investors' expectations of future economic conditions, rather than the Fed's current decisions.
Greg McBride, chief financial analyst at Bankrate, said concerns over inflation and an “unsustainable” path to government borrowing are contributing to the sharp rise in long-term interest rates, and with them mortgage rates. said. He expects mortgage interest rates to be around 6.5% by the end of 2025.
The housing market has been stagnant for years, with mortgage rates rising sharply in 2022 and 2023, peaking at nearly 8%. Many homeowners are feeling stuck with the low interest rates they secured early in the pandemic (the 30-year average rate is about 3%) and are reluctant to put their homes on the market. The lack of supply has kept prices high, making it even more difficult for buyers facing soaring mortgage rates.
Those looking to buy or sell may need to readjust to a stubbornly higher interest rate than they would like. Heather Mahmoud Khoury, a real estate agent with Redfin in Phoenix, says this shift in thinking is already underway. This week, one of her clients told her she was ready to buy a house within three to six months, regardless of borrowing costs. Mahmoud-Khoury says she has started hearing such opinions more often.
“A lot of people were waiting to see what would happen with the new government,” Ms Mahmoud-Khoury said. “But there are also a lot of buyers who don't have a problem with these rates and realize that they won't be as low in 2025 as they had hoped.”
Borrowing costs are not the only consideration when deciding whether and when to buy a home. Existing home sales rose 4.8% in November, according to the latest data, showing more buyers are jumping into the market. Strong employment and income growth is supporting some activity.
After all, “we're not in an environment where we can just sit back and hope that mortgage rates will fall significantly and affordability concerns will ease,” Bankrate's McBride said.
