The average rate on 30-year fixed-rate mortgages surpassed 7 percent for the first time since May, Freddie Mac reported on Thursday, extending a weekslong climb that could push more buyers and sellers to the sidelines.
The rate on the 30-year mortgage, the most popular home loan in the United States, jumped to 7.04 percent this week, up from 6.93 percent the previous week. Mortgage rates tend to track the yield on 10-year Treasury bonds, which has risen in recent months in response to a string of strong economic data, persistent inflation and a potential rise in debt and deficits stemming from potential policies of the incoming Trump administration.
“The underlying strength of the economy is contributing to this increase in rates,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
There was a moment in late September when mortgage rates, after a monthslong decline, appeared poised to drop below the symbolic 6 percent threshold, a boon to would-be buyers. But that window has closed, at least for now.
Inflation has recently proved stubborn. In December, the Consumer Price Index rose 2.9 percent from a year earlier, the Labor Department said on Wednesday, indicating that the Federal Reserve has not yet won its battle against rapid price increases. Last year, the Fed began to cut interest rates from the highest levels since the 2008 global financial crisis. But the central bank signaled only two reductions this year.
Mortgage rates have been climbing even as the Fed has cut the short-term rate it controls. That divergence is largely because longer-term rates set by the market, including mortgages, reflect investors’ expectations of future economic conditions, rather than the Fed’s current decisions.