Mortgage rates rose this week to the highest level in a year, mortgage buyer Freddie Mac said Thursday.
Freddie Mac’s latest Primary Mortgage Market Survey, released Thursday, showed the average rate on the benchmark 30-year fixed mortgage climbed to 6.66% from last week’s reading of 6.58%.
The average rate on a 30-year loan was 6.72% a year ago.
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“The housing market continues to benefit from more available inventory, providing prospective homebuyers with additional options and helping support buyer activity as mortgage rates fluctuate,” said Sam Khater, Freddie Mac’s chief economist.
The average rate on a 15-year fixed mortgage rose to 6.04% from last week’s reading of 5.96%.
Mortgage rates are affected by several factors, including the Federal Reserve and geopolitics. The eight basis point rate increase comes as the conflict in Iran pushed yields higher and the Fed’s decision to hold interest rates steady at its latest policy-setting meeting.
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Though mortgage rates are not directly affected by the Fed’s interest rate decisions, they closely track the 10-year Treasury yield. The 10-year yield hovered around 4.66% as of Thursday afternoon.
Fed policymakers on Wednesday voted 9-3 to leave the benchmark federal funds rate unchanged at its current range of 3.5% to 3.75%. The move follows the central bank’s decision to hold rates steady in January, March, April and June following three successive 25-basis-point rate cuts in September, October and December to close out last year.
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“With the Fed signaling that its next move is more likely a hike than a cut, near-term rate relief looks unlikely,” said Realtor.com senior economist Anthony Smith. “Because oil remains the primary channel through which the Iran conflict feeds inflation, a de-escalation and a reopening of the Strait of Hormuz remains the clearest path back toward lower rates.”
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The Federal Open Market Committee (FOMC), the central bank’s panel responsible for monetary policy moves, noted that “economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East.”
“Would-be buyers, especially first-timers who tend to carry larger loans, are the most exposed to each uptick in borrowing costs, while owners holding sub-4% rates have little reason to list and swap into today’s market,” Smith said. “That lock-in continues to cap inventory even as the sellers who do list increasingly price to move.”