The average rate for a 30-year mortgage in the United States reached a six-month high this week and also leapfrogged the rate during the same stretch one year ago.
Why It Matters
High mortgage rates and home prices have kept homeownership out of reach for many prospective buyers.
What To Know
The average rate for a 30-year mortgage climbed to 6.91 percent from 6.58 last week, mortgage buyer Freddie Mac said Thursday, as it also surpassed the 6.62 percent rate from the same period one year ago.
The average rate on a 15-year mortgage also rose, to 6.13 percent from 6 last week. It is also the highest rate for this type of home loan since July and up from the 5.89 percent rate a year earlier.
How Have Mortgage Rates Fluctuated?
Mortgage rates hit their lowest average in two years in late September at 6.08 percent. After reaching this low, rates started to creep back up, peaking at 6.79 percent in early November, and have been fluctuating since. This week's mortgage rate is the highest since July.
Interest Rates Increase After Fed Announcement
Interest rates for consumers have been rising since the Federal Reserve suggested last month it would cut its benchmark interest rate, known as the federal funds rate, just twice next year, rather than the four times estimated in September.
The federal funds rate is the target interest rate at which commercial banks borrow and lend their extra reserves to one another overnight. If the federal funds rate continues to decrease, the cost of consumer borrowing—including mortgages, auto loans and credit cards—should go down over time.
The Fed cut its benchmark interest rate three times from September to December after the central bank raised it 11 times in 2022 and 2023 to curb high inflation, which hit both the United States and countries around the world after the COVID-19 pandemic.
While the recent cuts are a good sign, just the prospect of fewer rate cuts in 2025 has negatively impacted consumer borrowing costs.
What People Are Saying
Freddie Mac chief economist Sam Khater told the Associated Press, "Inching up to just shy of 7%, mortgage rates reached their highest point in nearly six months."
"Compared to this time last year, rates are elevated and the market's affordability headwinds persist. However, buyers appear to be more inclined to get off the sidelines as pending home sales rise," he added.
Federal Reserve Chairman Jerome Powell told reporters when announcing the December rate cut: "The economy is strong overall and has made significant progress toward our goals over the past two years."
What Happens Next
Most economists predict that the average rate on a 30-year mortgage will remain above 6 percent in 2025. One factor that could keep mortgage rates elevated is whether President-elect Donald Trump's economic policies will contribute to higher inflation and increase the national debt.
This article includes reporting from the Associated Press.
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