The average long-term mortgage rate in the United States rose again this week, reflecting the bond market’s current jitters over the war with Iran.
The benchmark 30-year fixed-rate mortgage rate rose to 6.11% from 6% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.65%.
The average rate has now returned to the level of five weeks ago. Just two weeks ago, it hit its lowest level in three and a half years. It’s been hovering around 6% this year, an encouraging backdrop for prospective homebuyers who can afford to buy at current rates just as the spring home-buying season begins.
Meanwhile, borrowing costs for 15-year fixed-rate mortgages, popular among homeowners refinancing their home loans, also rose this week. That average rate increased to 5.5% from 5.43% last week. A year ago, it was 5.8%, Freddie Mac said.
Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations about the economy and inflation. They generally track the path of the 10-year Treasury yield, which lenders use as a guide in pricing mortgage loans.
The 10-year Treasury yield was 4.25% at midday Thursday, down from 4.13% a week ago.
Treasury yields have risen recently as rising oil prices have stoked fears of higher inflation. That concern has outweighed last month’s surprisingly weak report on hiring by U.S. employers and a relatively stable snapshot of consumer inflation taken before the outbreak of war with Iran.
“Under normal circumstances, these weak economic readings would put downward pressure on mortgage rates; however, news from the Middle East is overriding those signals,” Hannah Jones, senior research analyst economist at Realtor.com, said in an email.
Higher oil prices may put upward pressure on inflation, which could prevent the Federal Reserve from lowering interest rates.
The central bank does not set mortgage rates, but its decisions to raise or lower its short-term rate are closely watched by bond investors and can ultimately affect the yield on the 10-year Treasury bonds that influence mortgage rates.
The US housing market remains in a crisis that dates back to 2022, when mortgage rates began to rise from pandemic-era lows.
Sales of previously occupied U.S. homes have remained near a 4 million annual pace since 2023, well below the 5.2 million annual pace that has historically been the norm. They sank last year to their lowest level in 30 years and have remained sluggish so far this year, falling short of their year-ago pace in January and February, even as mortgage rates are lower than a year ago.