Long-term mortgage rate hits 6.51%, reaching its highest level in nearly 9 months

The average long-term U.S. mortgage rate increased this week to the highest level in nearly nine months, raising borrowing costs for homebuyers during the busiest time of the year. The benchmark 30-year fixed rate rose to 6.51% from 6.36% last week. Rates remain below the 6.86% level from a year ago. Mortgage rates have trended higher since the war with Iran began, as the closure of the Strait of Hormuz has pushed crude oil prices higher and contributed to inflation pressures. Long-term bond yields have risen due to expectations of higher oil prices and concerns about growing U.S. and other debts, lifting the 10-year Treasury yield and mortgage pricing. The 15-year fixed rate also rose to 5.85% from 5.71% last week.

"The benchmark 30-year fixed rate mortgage rate rose to 6.51% from 6.36% last week, mortgage buyer Freddie Mac said Thursday. Despite the sharp increase, the average rate remains below 6.86%, where it was a year ago. Rates have been mostly trending higher since the war with Iran began. The closure of the Strait of Hormuz has roiled energy markets, sending crude oil prices sharply higher - a key driver of inflation."

"Mortgage rates are influenced by several factors, from the Federal Reserve's interest rate policy decisions to bond market investors' expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. Expectations of higher oil prices and worries about big and growing debts for the U.S. government and others have pushed up long-term bond yields, causing mortgage rates to head higher."

"The yield on the U.S. 10-year Treasury note, which was at 4.6% in midday trading Thursday on the bond market. A week ago, it was at 4.47%. It was at just 3.97% in late February, before the war broke out. Meanwhile, borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week. That average rate climbed to 5.85% from 5.71% last week."

"When mortgage rates rise they can add hundreds of dollars a month in costs for borrowers, reducing their purchasing power. As recently as late February, the average rate on a 30-year mortgage had slipped just under 6% for the first time since late 2022. It's hasn't fallen below that threshold since. It's now at its highest level since August 28, when it was 6.56%."

Read at Fast Company