30-Year Mortgage Rate Jumps to 6.85%, Surpassing July’s Peak

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The average rate on a 30-year mortgage in the U.S. rose for the second consecutive week, reaching its highest level since mid-July, driven by a recent surge in bond yields that lenders use to set home loan rates. 

The rate increased to 6.85% from 6.72% last week, according to Freddie Mac. A year ago, the rate stood at 6.61%. This marks the highest rate since the week of July 11, when it was 6.89%. The rate hit a two-year low of 6.08% in September and peaked at 7.22% in May.

Economists predict the average rate will stay above 6% next year, with some estimates reaching up to 6.8%, in line with the current range.

Rates on 15-year fixed mortgages, popular for refinancing, also rose this week, climbing to 6% from 5.92%. Last year, the average was 5.93%.

High mortgage rates and rising home prices have made homeownership unaffordable for many. While sales of existing U.S. homes increased in November for the second consecutive month, the housing market is still struggling and on track for its worst year since 1995.

Mortgage rates are influenced by various factors, including the U.S. 10-year Treasury yield. Last week, bond yields climbed after the Federal Reserve indicated that fewer interest rate cuts are likely next year than previously expected.

Although the Fed doesn't directly set mortgage rates, its actions and inflation trends influence the 10-year Treasury yield.

A key uncertainty for mortgage rates next year is the potential impact of President-elect Donald Trump’s policy proposals, which could lead to higher inflation and a larger national debt, potentially keeping mortgage rates high. Inflation, the U.S. deficit, and the overall economy can all affect the 10-year Treasury yield, which, after being below 3.7% in September, reached 4.61% in midday trading on Thursday.

Paraphrasing text from "AP" all rights reserved by the original author.