US mortgage rates have increased to nearly 7%, making it difficult for buyers to enter the housing market. According to Freddie Mac, the average on a 30-year mortgage rose to 6.91% as of January 2, a week earlier at 6.85%. The Mortgage Bankers Association’s measure also advanced to 6.97%, its highest level in nearly six months.
High borrowing costs are weighing on affordability and have reduced demand for homes. The MBA’s index of home-purchase applications slid nearly 7% to its lowest level since mid-November, despite seasonal adjustments. Industry experts predict that the housing market will face another year of higher interest rates in 2025.
Mortgage rates tend to follow Treasury yields, which rose in late December after the Federal Reserve announced a slower pace of interest-rate cuts. If mortgage rates stabilize at high levels, it could help kick-start a housing recovery. However, if the Fed continues to cut its benchmark interest rate, mortgage rates may ease from current levels.
Despite rising mortgage rates, data from the National Association of Realtors shows that prospective homebuyers are adapting to a higher rate environment. In November, when mortgage rates averaged 6.8%, contract signings for purchases of previously owned homes reached their highest level since February 2023. The MBA survey, which covers over 75% of all retail residential mortgage applications in the US, has been conducted weekly since 1990 and provides valuable insights into market trends.
Source: https://finance.yahoo.com/news/us-mortgage-rates-rise-highest-120000062.html