Mortgage rates have reached their highest level in nearly six months, averaging 6.91% for a 30-year fixed-rate mortgage as of January 2, according to Freddie Mac data. This marks a significant increase from the prior week’s average of 6.85%. A year ago, mortgage rates averaged 6.62%.
The Federal Reserve’s quarter-point interest rate cut last month was expected to lower mortgage rates, but inflation remains above its 2% target, and the labor market is on solid footing. As a result, the central bank has revised its outlook for this year’s rate cuts.
Mortgage rates are closely tied to 10-year US Treasury yields, which have been steadily rising over the past month. The widening debt burden and concerns about future growth under a second Trump administration are contributing factors.
According to Freddie Mac’s chief economist, Sam Khater, mortgage rates are elevated compared to this time last year, with the market experiencing affordability headwinds persisting. This has led to a decline in mortgage applications, which decreased by 21.9% for the week ending December 27 compared to two weeks earlier.
Housing activity typically slows down during the holiday season, resulting in declines in both refinance and purchase applications. The pain for prospective homebuyers continues as they face higher mortgage rates, making it challenging to enter the market.
Source: https://edition.cnn.com/2025/01/02/economy/mortgage-rates-2024/index.html