Average long-term mortgage rates in the U.S. rose to a five-week high, a setback for prospective homebuyers during what is traditionally the busiest time of the year for home sales.
Mortgage buyer Freddie Mac announced Thursday that its average interest rate on 30-year mortgages rose to 6.88% from 6.82% last week.
The average interest rate a year ago was 6.27%.
Rising mortgage rates could add hundreds of dollars in additional costs to borrowers each month, and the U.S. housing market remains constrained by relatively few homes for sale and rising home prices. This will limit the amount that borrowers can pay.
Interest rates have mostly risen in recent weeks, with stronger-than-expected reports on employment and inflation raising doubts among bond investors about how quickly the Federal Reserve will move to cut its benchmark rate. There is a tendency.
The central bank has indicated it expects to cut short-term interest rates three times this year once it sees further evidence of cooling inflation.
U.S. Treasury yields soared in the bond market on Wednesday after reports that inflation last month was higher than economists expected.
March’s consumer price data was the third consecutive time that inflation has shown well above the Fed’s 2% target.
Thursday’s report showed that wholesale-level inflation was slightly lower than economists expected last month.
The yield on the 10-year U.S. Treasury, which lenders use as a guide to pricing loans, rose to 4.57% on Thursday afternoon, its highest level since November.
The bond market’s reaction to the Fed’s interest rate policy, trends in the 10-year Treasury yield, and other factors can affect mortgage rates.
After rising to a 23-year high of 7.79% in October, the average interest rate on 30-year mortgages has remained below 7% since early December, but still below the average of 6.6% in mid-January.
Hannah Jones, senior economic research analyst at Realtor.com, said mortgage rates will remain in the 6.6% to 7% range until inflation shows convincing progress toward the Fed’s goals. He said he is likely to continue.
“Eager buyers and sellers are expecting more favorable housing conditions as the spring sales season begins,” Jones said. “However, mortgage rates offer little reassurance as economic indicators measured by both inflation and employment remain strong.”
The U.S. housing market is emerging from a severe two-year sales slump caused by soaring mortgage rates and a shortage of homes on the market.
A general decline in mortgage rates since their peak last fall helped fuel the rebound in sales in the first two months of this year.
In February, sales of existing homes in the United States increased at the fastest pace in a year compared to the previous month.
This followed a month-on-month increase in home sales in January.
Still, the average interest rate on a 30-year mortgage is significantly higher than the 5% it was just two years ago.
Many homeowners who bought or refinanced more than two years ago are reluctant to sell or abandon a fixed-rate mortgage below 3% or 4%, so the difference between current and then-current interest rates is The wide disparity helps limit the number of existing homes on the market. .
Although many economists still expect mortgage rates to moderate gradually in the second half of this year, most forecasts expect the average rate on a 30-year mortgage to remain above 6%.
Mortgage refinance costs also rose this week.
Borrowing costs for 15-year fixed-rate mortgages, which are often used to refinance long-term mortgages, rose this week, with the average interest rate rising to 6.16% from 6.06% the previous week.
A year ago, the average was 5.54%, Freddie Mac said.
