6.85% rise to average rate for 30-year mortgage

Robert Besser
30 Dec 2024

WASHINGTON, D.C.: The average 30-year mortgage rate in the U.S. has reached its highest level since mid-July, driven by rising bond yields that lenders use to set home loan prices.

Freddie Mac reported this week that the rate increased to 6.85 percent, up from 6.72 percent the previous week.

The 30-year mortgage rate stood at 6.61 percent a year ago. Though it dropped to a two-year low of 6.08 percent in September, it reached as high as 7.22 percent in May. Many economists predict rates will remain above six percent next year, with some forecasting an upper limit of 6.8 percent, aligning with 2024's range.

Borrowing costs for 15-year fixed-rate mortgages, which are often used by homeowners for refinancing, also rose this week. The average rate increased to six percent, up from 5.92 percent last week and slightly above last year's 5.93 percent.

High mortgage rates combined with rising home prices have kept many potential buyers out of the market. Despite a slight increase in sales of previously occupied homes in November-the second consecutive monthly gain-the housing market remains in a prolonged slump, set to close its worst year since 1995.

Several factors, including movements in the yield on U.S. 10-year Treasury bonds influence mortgage rates. Recent increases in bond yields followed the Federal Reserve's signal that fewer rate cuts are expected next year than previously anticipated. While the Fed doesn't directly set mortgage rates, its decisions and inflationary trends significantly impact Treasury yields.

Freddie Mac noted that President-elect Donald Trump's policy initiatives could further affect mortgage rates next year. If his proposals lead to higher inflation or an increase in the national debt, mortgage rates may remain elevated due to their influence on the 10-year Treasury yield.

The 10-year Treasury yield, a key benchmark for mortgage rates, was at 4.61 percent in midday trading on December 26, a significant rise from levels below 3.7 percent in September.