Average US 30-year mortgage rate surges to 6.32%, adding pressure to buyers facing high home prices

The average rate on a 30-year mortgage in the U.S. surged to 6.32% this week, adding pressure on home buyers facing sky-high prices and a limited supply of houses for sale.

The rate ticked up from 6.12% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 7.57%.

Two weeks ago, the average rate slipped to its lowest level in two years — 6.08% — boosting home shoppers’ purchasing power as they navigate a housing market with prices near all-time highs.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield on the 10-year Treasury was 4.10% Thursday, up from 3.62% in mid-September, just days before the Fed slashed its benchmark lending rate by a half a point.

“We should remember that the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year,” said Sam Khater, Freddie Mac’s chief economist. “Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market.”

The average rate on a 30-year mortgage is still well below the 7.22% it hit in May, its 2024 peak. Until the past two weeks, rates had been mostly declining since July in anticipation of last month’s move by the Federal Reserve to cut its main interest rate for the first time in more than four years.

Fed officials also signaled they expect further cuts this year and in 2025 and 2026. The rate cuts should, over time, lead to lower borrowing costs on mortgages.

The average rate on a 30-year mortgage rose from below 3% in September 2021 to a 23-year high of 7.8% last October. That coincided with the Fed increasing its benchmark interest rate to fight the inflation that took hold during the COVID-19 pandemic.

When mortgage rates rise they can add hundreds of dollars a month in costs for borrowers. The housing market has been in a sales slump since 2022 as elevated mortgage rates discouraged many would-be homebuyers. Sales of previously occupied U.S. homes fell in August even as mortgage rates began easing.

Economists generally expect mortgage rates to remain near their current levels, at least this year. Fannie Mae projects the rate on a 30-year mortgage will average 6.2% in the October-December quarter and decline to an average of 5.7% in the same quarter next year.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, increased again this week. The average rate rose to 5.41% from 5.25% last week. A year ago, it averaged 6.89%, Freddie Mac said.

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