By ALEX VEIGA
Updated [hour]:[minute] [AMPM] [timezone], [monthFull] [day], [year]
LOS ANGELES (AP) — The average long-term U.S. mortgage rate climbed back to nearly 7% this week, pushing up borrowing costs for home shoppers with the spring homebuying season underway.
The average rate on a 30-year mortgage rose to 6.87% from 6.74% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.42%. The average rate is now just below where it was two weeks ago.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week, pushing the average rate to 6.21% from 6.16% last week. A year ago it averaged 5.68%, Freddie Mac said.
When mortgage rates rise, they can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans.
“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” said Sam Khater, Freddie Mac’s chief economist.
Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with its short-term interest rate can influence rates on home loans.
After climbing to a 23-year high of 7.79% in October, the average rate on a 30-year mortgage has remained below 7% since early December. Rates eased amid expectations that inflation was cooling enough for the Fed to begin lowering its short-term interest rate by this spring. But a spate of stronger-than-expected reports on inflation, the job market and the economy in recent weeks dimmed that outlook, sending mortgage rates higher through most of February.
Many economists expect that mortgage rates will ultimately ease moderately this year, but that’s not likely to happen before the Federal Reserve begins cutting its benchmark interest rate. On Wednesday, the central bank kept its rate unchanged and signaled again that it expects to make three rate cuts this year, but not before it sees more evidence that inflation is slowing.
“The Fed’s announcement that it is holding interest rates steady for now was not unexpected, but it does mean that mortgage rates are going to remain higher for longer,” said Lisa Sturtevant, chief economist at Bright MLS.
The U.S. housing market is coming off a deep, 2-year sales slump triggered by a sharp rise in mortgage rates and a dearth of homes on the market. The overall decline in rates since their peak last fall has helped lower monthly mortgage payments, providing more financial breathing room for homebuyers facing rising prices and a shortage of homes for sale this year.
Sales of previously occupied U.S. homes rose in February from the previous month to the strongest pace in a year. That followed a month-to-month home sales increase in January.
Still, the average rate on a 30-year mortgage remains well above where it was just two years ago at 4.42%. That large gap between rates now and then has helped limit the number of previously occupied homes on the market by discouraging homeowners who locked in rock-bottom rates from selling.
FAQs
The average rate on a 30-year loan climbs to 7.03%, according to Freddie Mac. The average 30-year fixed mortgage rate climbed past 7% this week, hitting 7.03% from 6.94% a week prior, according to Freddie Mac. Rates have mostly stayed above 7% since mid-April but had been on the decline for almost a month.
When was the last time 7% mortgage rates? ›
Near the end of October 2022, the 30-year mortgage rate jumped from 6.94% to 7.08%, according to Mortgage buyer Freddie Mac. Prior to that, the last time the average mortgage rate hovered around 7% was in April of 2002.
What is the average long term US mortgage rate? ›
The long-term average for mortgage rates is just under 8 percent.
What is the long term mortgage rate forecast? ›
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. However, recent economic developments have led some forecasters to believe that rates will remain elevated at around 7% for the remainder of this year.
Why are mortgage rates going back up? ›
Inflation and Fed hikes have pushed mortgage rates up to a 20-year high. 30-year mortgage rates are currently expected to fall to between 6.5% and 7% in 2024. Homebuyers might consider buying now and refinancing later to avoid increased competition when rates drop.
Why do mortgage rates keep climbing? ›
A year ago, mortgage rates averaged 6.39%. The 15-year fixed-rate mortgage also rose, averaging 6.47% this week. That's up from 5.76% a year ago. With inflation remaining stubbornly high and the labor market strong, the Federal Reserve continues to keep interest rates at elevated levels.
What is the US long term average interest rate? ›
US Long-Term Interest Rates is at 4.51%, compared to 4.48% last month and 3.75% last year. This is higher than the long term average of 4.49%. US Long Term Interest Rates is a data point released by Robert Shiller.
What is the average mortgage rate for 30 years right now? ›
Current mortgage and refinance interest rates
| Product | Interest Rate | APR |
|---|
| 10-1 ARM | 7.12% | 7.91% |
| 30-Year Fixed Rate FHA | 6.99% | 7.03% |
| 30-Year Fixed Rate VA | 7.62% | 7.65% |
| 30-Year Fixed Rate Jumbo | 7.08% | 7.13% |
5 more rowsHistorical Mortgage Rates by Decade
| Minimum Mortgage Rate | Median Mortgage Rate |
|---|
| 1990-1999 | 6.49% | 7.88% |
| 2000-2009 | 4.71% | 6.18% |
| 2010-2019 | 3.31% | 4.03% |
| 2020-Present | 2.65% | 3.51% |
2 more rowsNov 22, 2023
This is down from early May, when rates hit 7.11%. Rates could continue to decrease if inflation cools, but don't expect a huge drop this year. According to the Mortgage Bankers Association's latest forecast, mortgage rates may fall to 6.5% by the end of 2024.
There are no sources for officially projected interest rates in five years, but the Mortgage Bankers Association does predict rates on 30-year mortgages will drop to 5.9% by the end of 2025. Fannie Mae predicts a 6.6% rate.
What is the interest rate forecast for the next 5 years? ›
The median projection for the benchmark federal funds rate is 5.1% by the end of 2024, implying just over one quarter-point cut. Through 2025, the FOMC now expects five total cuts, down from six in March, which would leave the federal funds rate at 4.1% by the end of next year.
Will mortgage rates ever go down to 3% again? ›
If the Federal Reserve cuts interest rates too quickly, it could spur inflation, erasing all the work the central bank has done to curb increasing prices over the past couple of years. So, any rate cuts in 2024 are likely to be minimal and unlikely to result in mortgage rates dropping to 3%.
Is 7 percent interest high for a mortgage? ›
Home buyers are going to have to settle for a 7% mortgage. The cost of a home loan has soared in recent years, in part thanks to a series of rate increases by the Federal Reserve. The average rate on a 30-year fixed mortgage was 6.74% this week, the mortgage giant Freddie Mac said.
What is the highest mortgage rates have ever gone? ›
Interest rates reached their highest point in modern history in October 1981 when they peaked at 18.63%, according to the Freddie Mac data. Fixed mortgage rates declined from there, but they finished the decade at around 10%.
How much have interest rates climbed? ›
The RBA raised the cash rate target by 425 basis points between May 2022 and December 2023. Over this period, the average outstanding mortgage rate increased by around 320 basis points.
