The average long-term U.S. mortgage rate has risen to nearly 7% this week, impacting homebuyers as the spring homebuying season gets underway. According to Freddie Mac, the average rate on a 30-year mortgage increased to 6.87% from 6.74% last week, marking a significant jump from the 6.42% rate recorded a year ago. Similarly, the average rate on 15-year fixed-rate mortgages climbed to 6.21% from 6.16% last week, compared to 5.68% a year ago.
Rising mortgage rates can lead to higher monthly costs for borrowers, potentially limiting their purchasing power in an already competitive housing market. Factors influencing these rate changes include investors' expectations for future inflation, global demand for U.S. Treasurys, and decisions made by the Federal Reserve regarding short-term interest rates.
Despite a brief decline in rates, recent economic indicators have pushed mortgage rates higher in February. While some economists anticipate a moderate easing of rates later in the year, this is likely to occur only after the Federal Reserve initiates cuts to its benchmark interest rate.
The U.S. housing market, which experienced a sales slump due to increased mortgage rates and limited inventory, has shown signs of recovery. Lower rates since last fall have helped reduce monthly mortgage payments, offering relief to buyers facing escalating prices and a shortage of available homes.
Although sales of previously owned homes have seen an uptick, the average 30-year mortgage rate remains significantly higher than two years ago, standing at 4.42%. This disparity has contributed to a decrease in the number of homes on the market, as homeowners with lower mortgage rates are less inclined to sell.
