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Higher mortgage rates can add hundreds of dollars a month in
costs for borrowers, limiting homebuyers’ purchasing power. As
rates rise, that can lead prospective home shoppers to delay
buying a home, one reason U.S. home sales remain in a rut this
year.
The average rate is now back to where it was four weeks ago and
is just shy of 6.69%, the high for the year it reached earlier
this month.
Borrowing costs on 15-year fixed-rate mortgages, often sought by
borrowers refinancing a home loan, also rose this week. That
average rate increased to 5.98% from 5.95% last week. A year
ago, it was at 5.69%.
Mortgage rates are influenced by several factors, including
inflation, broader policy rate decisions from the Federal
Reserve and expectations from bond market investors for the
economy. They generally follow the trajectory of the 10-year
Treasury yield, which lenders use as a guide to pricing home
loans.
Both mortgage rates and the bond market have been mostly rising
this year due to the U.S. war with Iran, which has fueled
expectations for hotter inflation as crude oil prices soared.
Long-term bond yields remain steeper than they were before the
conflict began in late February, helping drive mortgage rates
higher.
Worries about the U.S. government’s gargantuan and growing debt
have also helped drive up long term bond yields, prompting the
U.S. Treasury Department made to intervene last week, though
analysts say its effect could be limited.
The 10-year Treasury yield was 4.66% as of midday Thursday on
the bond market. Before the war, it was just 3.97% in late
February.
The U.S. housing market has been in a slump since 2022, when
mortgage rates began to climb from pandemic-era lows. Sales of
previously occupied U.S. homes were essentially flat last year,
stuck at a 30-year low. U.S. sales of those homes again slowed
in July.
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