Average US long-term mortgage rate climbs to 6.46%, the highest level in nearly 7 months

The average long-term U.S. mortgage rate climbed for the fifth straight week, reaching its highest level in nearly seven months, another setback for home shoppers in the midst of the spring homebuying season.

The benchmark 30-year fixed rate mortgage rate rose to 6.46% from 6.38% last week, mortgage buyer Freddie Mac said Thursday. One year ago, the rate averaged 6.64%.

The last time the average rate was higher was Sept. 4, when it was at 6.5%.

When mortgage rates rise, they can add hundreds of dollars a month in costs for home shoppers, limiting what they can afford to buy.

Only five weeks ago, the average rate had dropped to just under 6% for the first time since late 2022, but it has been rising as skyrocketing oil prices due to the war with Iran fuel worries about high inflation.

Meanwhile, borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week. That average rate rose to 5.77% from 5.75% last week. A year ago, it was at 5.82%, Freddie Mac said.

Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The 10-year Treasury yield was at 4.3% in midday trading on the bond market Thursday, down from 4.42% a week ago. The yield was at just 3.97% in late February, before the war with Iran sent oil prices soaring.

Treasury yields have been climbing as higher oil prices raise expectations for higher inflation. As long-term bond yields rise, that pushes up mortgage rates.

Higher inflation could also keep the Fed from cutting interest rates. The central bank doesn’t set mortgage rates, but its decisions to raise or lower its short-term rate are watched closely by bond investors and can ultimately affect the yield on 10-year Treasurys.

The U.S. housing market has been in a slump since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied U.S. homes were essentially flat last year, stuck at a 30-year low. They have remained sluggish so far this year, declining in January and February versus a year earlier.

The recent ramp up in rates makes it tougher for prospective homebuyers, threatening to put a damper on home sales during what’s traditionally the busiest time of the year for the housing market.

While the average rate on a 30-year mortgage is still down from a year ago, the recent upward trend has already led to a slowdown in mortgage applications.

Mortgage applications fell 10.4% last week from the previous week, according to the Mortgage Bankers Association. Much of the decline stemmed from fewer applications for mortgage refinancing loans.

"Looking ahead, stability in the mortgage rate environment will be key to bringing buyers back into the market,” MBA CEO Bob Broeksmit said in a statement.