This week, the average interest rate on a 30-year U.S. mortgage increased modestly. This ends a four-week streak of declines that had lowered borrowing costs for prospective homebuyers. In just one week, the typical mortgage rate surged, jumping up to 5.49% this week. That’s up from just 5.41% last week, an unmistakable sign that the housing market has changed radically.
In terms of housing affordability, mortgage rates have recently fallen to their lowest levels in almost a year. This decline will come as welcome news to future homebuyers. By way of comparison, the average rate was 6.08% exactly one year ago, based on figures from Freddie Mac. This timeliness spike serves as a painful reminder of the unpredictable rollercoaster that mortgage rates have been and continue to be for borrowers.
To put that into context, the average rate was actually lower than this—5.16%—a full year earlier. In fact in the current tightening cycle, mortgage rates have tracked very closely to changes in the 10-year Treasury yield. This yield serves as a bellwether for guidance to lenders as they price residential mortgages. As of midday Thursday, the 10-year Treasury yield was 4.19%, up from 4.16% late Wednesday.
Mortgage interest rates have soared in recent months, ending an almost two-decade period characterized by record-low mortgage rates. This trend first started to materialize in 2022. This uptick in rates has definitely put the brakes on an otherwise strong housing market. In 2022, sales of existing homes sank to their lowest point in almost three decades. The Federal Reserve’s recent interest rate cut added another layer of uncertainty to the market. This step alone doesn’t guarantee that the ongoing slide in mortgage rates will continue.
As the housing market navigates these changes, potential homebuyers must remain vigilant about fluctuating interest rates and their implications for affordability. The average mortgage rate ticked up a little. This change will likely affect market sentiment and buyer activity in both positive and negative ways as we head into 2024.
