LOS ANGELES (AP) — The average long-term U.S. mortgage rate rose this week to its highest level since mid March, driving up borrowing costs for prospective homebuyers facing a housing market that's constrained by a dearth of homes for sale.
Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan rose to 6.57% from 6.39% last week. The average rate a year ago was 5.10%.
High rates can add hundreds of dollars a month in costs for homebuyers, limiting how much buyers can afford in a market that remains unaffordable to many Americans after years of soaring home prices and limited housing inventory.
The average rate on a 30-year home loan has risen two weeks in a row, echoing moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans.
The 10-year Treasury yield has been mostly rising of late, climbing to 3.77% in midday trading Thursday. Two weeks ago, it was at 3.39%.
The move up in bond yields comes as investors react to stronger-than-expected economic data and the implications that could have on whether the Federal Reserve will raise interest rates again next month.
Bond traders are also factoring in the possibility that the U.S. government may default on its debt as the White House and GOP leadership wrangle over a deal to raise the federal government's debt ceiling so it can avoid an unprecedented default as soon as June 1.
"The U.S. economy is showing continued resilience which, combined with debt ceiling concerns, led to higher mortgage rates this week," said Sam Khater, Freddie Mac's chief economist.
Investors' expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates also influence rates on home loans.
The Fed has raised its benchmark interest rate 10 times in 14 months. At its last meeting of policymakers, the central bank signaled that it could finally pause its yearlong campaign of rate hikes, though a pause would likely only nudge mortgage rates slightly lower.
Low mortgage rates helped fuel the housing market for much of the past decade, easing the way for borrowers to finance ever-higher home prices. That trend began to reverse a little over a year ago, when the Fed started to hike its key short-term rate in a bid to slow the economy and cool the highest inflation in four decades.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, rose to 5.97% this week from 5.75% last week. A year ago, it averaged 4.31%, Freddie Mac said.