US: Mortgage rates climb above 7%, highest level since May 2024

Mortgage rates in the United States have surpassed the 7% mark, reaching their highest level since May 2024.

According to Freddie Mac’s weekly survey, the average rate on a 30-year fixed mortgage rose to 7.04% in the week ending January 16.

This marks the fifth consecutive weekly increase. Compared to late September when the Federal Reserve began cutting interest rates, the average mortgage rate is nearly a full percentage point higher.

The rise in rates has been attributed to the recent increase in the yield on the 10-year US Treasury note, influenced by stubborn inflationary pressures.

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However, a decline in the yield on Wednesday followed the release of the Consumer Price Index, which indicated that inflation progress was back on track. Despite this, the Federal Reserve has signalled only two rate cuts this year, likely to occur later in the year.

In addition to higher borrowing costs, prospective homebuyers are facing near-record home prices and rising home insurance premiums in some regions. First-time buyers and low-income households in metropolitan areas with rapid price growth, such as New York and San Diego, are particularly affected.

Economists have predicted little improvement in the housing market this year, with mortgage rates expected to remain above 6% through 2026.

“The underlying strength of the economy is contributing to this increase in rates,” said Sam Khater, Freddie Mac’s chief economist. “Despite rising rates, Freddie Mac research highlighted that consumers can save money if they shop for several different lender quotes.”

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