Key facts
- The average rate for a 30-year fixed-rate mortgage is nearing 7%, reaching 6.76% in the latest week.
- Rates for 15-year fixed-rate loans and 5-year adjustable-rate mortgages also increased.
- Mortgage application volumes declined, particularly for refinances, due to rising borrowing costs.
- Despite higher rates, overall mortgage applications saw a slight increase.
- Housing affordability has decreased for the third consecutive month but is better than a year ago.
- Lower-priced housing markets are experiencing stable demand and increased inventory.
U.S. mortgage interest rates have climbed to their highest in approximately a year across various loan products, driven by renewed geopolitical tensions in the Middle East that have pushed up oil prices and inflation-sensitive Treasury yields. The contract rate on a 30-year, fixed-rate mortgage, the most common U.S. home loan, rose 7 basis points to 6.76% in the week ended July 24, according to the Mortgage Bankers Association (MBA). Rates for 15-year fixed-rate loans increased by 11 basis points to 6.15%, and adjustable-rate mortgages also saw higher rates.
With the Federal Reserve expected to announce its interest rate decision soon, and with potential rate hikes anticipated, a significant pullback in mortgage rates is unlikely in the near future. Inflation, measured by the Fed's preferred gauge, was running at 4.1% in May and is expected to have fallen to 3.7% last month, though this decrease may be temporary due to ongoing Middle East hostilities and their impact on energy prices. This has kept upward pressure on longer-dated Treasury yields, which serve as benchmarks for mortgage rates.
The rise in rates has dampened mortgage application volumes. The MBA's mortgage market index fell 6.4% last week, with a 9.9% decrease in refinancing applications, reaching a 13-month low. Purchase application volumes also declined. Joel Kan, MBA's deputy chief economist, noted that higher rates are exacerbating affordability challenges for homebuyers, contributing to the decrease in purchase activity.