Mortgage Rates Climb to 7.4 Percent in Freddie Mac Survey
U.S. mortgage rates rose for the seventh week, with the average rate on the benchmark 30-year fixed mortgage climbing to 7.4% from 7.28% the previous week, according to Freddie Mac data released on Thursday. Fox Business reported that the same loan product averaged 6.3% a year ago, reflecting a significant year-over-year jump in borrowing costs for prospective homebuyers.
The persistent upward movement in borrowing costs stems from broader shifts in the domestic bond market. Realtor.com senior economist Joel Berner pointed to sustained pressure from the 10-year Treasury yield, which averaged 5.28% during the survey week—up 9 basis points from the prior week. Berner described the driving forces as a combination of inflation expectations, a bond market selloff, and rising fiscal deficits that require fresh debt issuance.
Treasury Yields Drive Market Dynamics
While the Federal Reserve does not directly set mortgage rates, mortgage pricing closely tracks the movement of the 10-year Treasury yield. On Thursday afternoon, the 10-year yield hovered near 5.22%. Alongside the benchmark 30-year loan, shorter-term financing also grew more expensive. The average rate on a 15-year fixed mortgage increased to 6.73%, up from 6.6% the week before.
Berner stated that the elevated rate environment has left the housing market spooked. Pending home sales declined year over year across both August and September, predating the milestone where average rates crossed the 7% threshold. Consequently, home sellers have adjusted by cutting asking prices at a pace not observed in four years.
Cash Buyers Buck Broader Market Trend
Despite financing headwinds constraining traditional buyers, cash purchasers face different conditions in the current housing market. Berner noted that cash buyers benefit from favorable dynamics, supported by a 1.4% year-over-year decline in home prices and a 5.4% increase in for-sale inventory.