Average rate on a 30-year mortgage in the U.S. ticks up to 6.12%, first
increase in 7 weeks
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[October 04, 2024] By
MATT OTT
The average rate on a 30-year mortgage in the U.S. rose to 6.12% this
week, the first increase in seven weeks.
The rate ticked up from 6.08% last week, mortgage buyer Freddie Mac said
Thursday. A year ago, the rate averaged 7.49%.
Last week, the average rate slipped to its lowest level in two years,
boosting home shoppers’ purchasing power as they navigate a housing
market with prices near all-time highs.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners
seeking to refinance their home loan to a lower rate, increased again
this week. The average rate rose to 5.25% from 5.16% last week. A year
ago, it averaged 6.78%, Freddie Mac said.
Mortgage rates are influenced by several factors, including how the bond
market reacts to the Federal Reserve’s interest rate policy decisions.
That can move the trajectory of the 10-year Treasury yield, which
lenders use as a guide to pricing home loans. The yield on the 10-year
Treasury was at 3.82% Thursday, up from 3.78% last week.
The average rate on a 30-year mortgage is down from 7.22% in May, its
2024 peak. Rates have been mostly declining since July in anticipation
of last month’s move by the Federal Reserve to cut its main interest
rate for the first time in more than four years.
Fed officials also signaled they expect further cuts this year and in
2025 and 2026. The rate cuts should, over time, lead to lower borrowing
costs on mortgages.
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A housing development in Jackson Township, Pa., is shown on
July 11, 2024. (AP Photo/Gene J. Puskar, File)
Setting aside this week’s rise in
the average long-term rate, Freddie Mac Chief Economist Sam Khater
painted a more optimistic picture for prospective homebuyers.
“Zooming out to the bigger picture, mortgage rates have declined one
and a half percentage points over the last 12 months, home price
growth is slowing, inventory is increasing, and incomes continue to
rise,” Khater said. “As a result, the backdrop for homebuyers this
fall is improving and should continue through the rest of the year.”
The average rate on a 30-year mortgage rose from below 3% in
September 2021 to a 23-year high of 7.8% last October. That
coincided with the Fed increasing its benchmark interest rate to
fight inflation.
When mortgage rates rise they can add hundreds of dollars a month in
costs for borrowers. The housing market has been in a sales slump
since 2022 as elevated mortgage rates discouraged many would-be
homebuyers. Sales of previously occupied U.S. homes fell in August
even as mortgage rates began easing.
Economists generally expect mortgage rates to remain near their
current levels, at least this year. Fannie Mae projects the rate on
a 30-year mortgage will average 6.2% in the October-December quarter
and decline to an average of 5.7% in the same quarter next year.
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