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Mortgage rates in the United States increased for the second consecutive week, with the average 30-year fixed-rate home loan reaching 6.76% in the week ended 24 July, close to its highest level in a year, according to the Mortgage Bankers Association (MBA). The rise follows higher US Treasury yields and renewed inflation concerns linked to escalating geopolitical tensions in the Middle East. Rates on 15-year fixed mortgages climbed to 6.15%, while five-year adjustable-rate mortgages increased to 5.98%. Higher borrowing costs also weighed on housing demand, with overall mortgage applications falling 6.4% during the week as refinancing and home purchase activity weakened amid ongoing affordability pressures.
Mortgage interest rates in the United States climbed to their highest levels in around a year during the week ended 24 July, as rising Treasury yields and renewed inflation concerns pushed borrowing costs higher, according to data released by the Mortgage Bankers Association (MBA).
The average contract rate for a 30-year fixed-rate mortgage, the most widely used home loan product in the US, increased by seven basis points to 6.76%, approaching a one-year high. The average rate on a 15-year fixed-rate mortgage rose by 11 basis points to 6.15%, marking its highest level in just over a year.
Adjustable-rate mortgage (ARM) products also recorded higher borrowing costs. The average rate on a five-year ARM increased to 5.98%. Although such loans generally offer lower initial rates than fixed-rate mortgages, they expose borrowers to the risk of higher repayments when interest rates are reset.
The increase in mortgage rates followed renewed geopolitical tensions after fighting between the United States and Iran resumed, contributing to higher oil prices and raising concerns over inflation. These developments pushed up longer-term US Treasury yields, which serve as the principal benchmark for mortgage pricing.
The yield on the benchmark 10-year US Treasury note stood at around 4.63% during the week, remaining close to the 18-month high of 4.70% recorded recently. Higher Treasury yields generally translate into increased mortgage borrowing costs as lenders adjust loan pricing to reflect changing market conditions.
The latest mortgage data was released ahead of the US Federal Reserve's monetary policy announcement, with financial markets anticipating further interest rate increases in the coming months. Inflation, measured by the Federal Reserve's preferred gauge, stood at an annual rate of 4.1% in May and was expected to ease to 3.7% in June, although continued volatility in energy prices has kept inflation expectations elevated.
Higher borrowing costs continued to affect housing market activity. The MBA's Mortgage Market Index, which measures overall mortgage application volumes, declined by 6.4% on a seasonally adjusted basis during the week, reaching its lowest level in a year.
Refinancing activity recorded the sharpest decline, with applications falling 9.9% to their lowest level in 13 months. Applications for home purchase loans also weakened, reflecting reduced buyer demand as affordability pressures persisted.
Joel Kan, Deputy Chief Economist at the Mortgage Bankers Association, said the continued rise in mortgage rates had significantly reduced refinancing activity, particularly for government-backed loans. He added that although housing inventory had improved in several markets, higher borrowing costs continued to erode affordability for prospective homebuyers, contributing to the decline in purchase applications.
Source - Reuters
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