Average interest rate for 30-year mortgage increases for sixth straight week

The average interest rate for a 30-year mortgage has increased for the sixth week in a row.

The rate rose to 6.79 percent from 6.72 percent last week, mortgage buyer Freddie Mac said Thursday.

The week’s average interest rate on a 30-year mortgage is the highest since July 11, when it stood at 6.89 percent.

Borrowing costs on 15-year fixed-rate mortgages also rose to 6 percent this week from 5.99 percent last week.

Mortgage rates on a 30-year home loan have fluctuated throughout the year, reaching a high of 7.22 percent in May. In late September, the average interest rate fell to 6.08 percent, the lowest level in two years, after the Federal Reserve cut interest rates.

Potential home buyers are advised against

The recent rise in borrowing costs has put off some potential home buyers.

Last week, mortgage loan applications fell 10.8 percent on a seasonally adjusted basis compared to the previous week, according to the Real Credit Association, the leading trade association for the real estate finance industry.

It was the sixth week in a row that mortgage applications fell.

Meanwhile, applications for loans to refinance a mortgage fell by 19 percent. But they were still 48 percent higher than in the same week last year.

There is still hope for potential home buyers as real estate experts expect mortgage rates to stabilize by the end of 2024.

“While we still expect mortgage rates to stabilize by the end of the year, they are likely to be at a higher level than markets initially expected ahead of election week,” said Ralph McLaughlin, senior economist at real estate listings website Realtor.com.

US election effects Treasury yields

One of the many factors that affect mortgage rates is the 10-year U.S. Treasury bond rate, which lenders use as a guide to pricing home loans. The higher the interest rates on long-term US Treasuries, the more confidence investors have in the future of the economy. On the other hand, high long-term interest rates can also signal an expectation of rising inflation.

Bond yields have already been rising following encouraging reports on the economy, including inflation. But this week, interest rates rose on expectations that President-elect Donald Trump’s economic plan based on higher tariffs, lower tax rates and light regulation could lead to greater economic growth, but also higher inflation and federal government debt.

At noon on Thursday, the interest rate on 10-year government bonds was 4.36 percent. The dividend was 3.62 percent as recently as mid-September.

“Interest rates and borrower demand are likely to remain volatile in the coming weeks as financial markets digest both the election results and the Fed’s upcoming monetary policy decisions,” said MBA CEO Bob Broeksmit.

The Fed cuts interest rates again

Mortgage interest rates are also affected by the federal funds rate, which is the Federal Reserve’s benchmark interest rate.

The Fed cut its benchmark interest rate, which was at a 23-year high, by half a percentage point to between 4.75 and 5 percent in September.

The federal funds rate was raised by the Fed 11 times in 2022 and 2023 to curb high inflation that hit both the United States and countries around the world following the COVID-19 pandemic. September’s rate cut was the first in four years.

On Thursday, the Fed cut interest rates by a quarter point again, lowering rates to between 4.5 and 4.75 percent.

The federal funds rate is the target rate at which commercial banks borrow and lend their extra reserves to each other overnight. If the federal funds rate continues to fall, the cost of consumer borrowing — including mortgages, auto loans and credit cards — should fall over time.

This article includes reporting from the Associated Press.