U.S. 30-year mortgage rates hit 19-month high, Freddie Mac reported

Mortgage Rates Climb To Highest Level In 19 Months

The average U.S. rate on a 30-year fixed mortgage rose to 6.95% this week, the highest level in more than 19 months, Freddie Mac reported Thursday.

The benchmark rate climbed from 6.76% last week and now stands far above the 6.26% average recorded one year ago. Borrowing costs on 15-year fixed mortgages, often used for refinancing, also increased to 6.26% from 6.09% just one week earlier.

The U.S. Federal Reserve raised its key interest rate on Sept. 16 for the first time in three years, signaling another possible hike later this year.

U.S. Fed policymakers lifted the federal funds rate to a range of 3.75% to 4%, a quarter-point increase aimed at combating stubborn inflation pressures across the economy.

The increase since late February, when the 30-year rate briefly dipped to 5.98%, adds roughly $255 monthly for a $400,000 loan. That extra monthly cost now sharply squeezes affordability and sidelines even more prospective buyers as rates remain stuck near 7%.

Treasury Yields And Oil Prices Drive Mortgage Rates

The 10-year Treasury yield, which guides mortgage pricing, breached 5% Monday for the first time since 2023, market data show. That benchmark stood at 3.97% in late February before the U.S.-Iran war and reached around 4.94% by midday on Thursday.

U.S. benchmark oil prices near $91 per barrel, up 35% since the Iran war began on Feb. 28, have intensified inflation concerns weighing on global bonds.

HousingWire lead analyst Logan Mohtashami said mortgage spreads have improved substantially from their worst 2023 levels during the banking crisis. Without that improvement, he noted, today's mortgage rates would still be roughly 8.36% instead of the current level near 7%.

The U.S. Federal Reserve clearly remains constrained because economic growth has held up while rising commodity prices have created additional persistent inflation concerns for the policymakers.

HousingWire analyst Mohtashami said a sustained decline in mortgage rates would require easing geopolitical tensions, lower energy prices and less pressure from tariffs and other inflation sources.

Housing Market Healthier But Affordability Still Constrains Demand

Despite elevated mortgage rates, Mohtashami said housing market conditions have become healthier as home price growth has cooled and inventory has increased recently across the country.

Affordability, not inventory, clearly remains the primary constraint on U.S. housing demand for buyers, according to the HousingWire lead analyst's assessment of current market conditions today.

About 40% of U.S. homes have no mortgage, and aggregate homeowner equity is substantially higher than during the housing bubble. The loan-to-value ratio of mortgaged homes is also far below levels seen in the pre-recession days of 2006 to 2008.

HousingWire analyst Mohtashami disputed the idea that the current U.S. housing market in any way resembles the conditions that directly preceded the 2008 global financial crisis.

Pending home sales inched up 0.3% from July but fell 4.7% from August last year, the National Association of Realtors said. The labor market is unlikely to provide a catalyst for significantly lower mortgage rates in the near term, Mohtashami added.