U.S. Mortgage Rates Hit Six-Month High

WASHINGTON (Reuters) – U.S. mortgage rates jumped to a six-month high this week, suggesting that a recent improvement in home sales could be temporary.

The average rate on the popular 30-year fixed-rate mortgage increased to 6.91%, the highest level since early July, from 6.85% last week, according to mortgage finance agency Freddie Mac. This is an increase from an average of 6.62% during the same period a year ago.

> “Compared to this time last year, rates are elevated and the market’s affordability headwinds persist,” said Sam Khater, Freddie Mac’s Chief Economist.

Mortgage rates have trended higher despite the Federal Reserve cutting interest rates three times since starting its monetary policy easing cycle in September. These rates have risen in tandem with U.S. Treasury yields, reflecting a resilient economy and investor fears that President-elect Donald Trump’s proposed policies, including tax cuts, higher tariffs on imports, and mass deportations, could reignite inflation.

Mortgage rates correlate with the 10-year Treasury note. Sales of previously owned homes surged to an eight-month high in November, primarily reflecting contracts signed in October and possibly September when mortgage rates were generally lower.

Sales may continue to rise in December, with contracts increasing to a 21-month high in November. Increased supply is drawing more buyers into the market, but higher mortgage rates might discourage some homeowners from listing their properties, especially if they need to find another home.

Many homeowners currently have mortgages below 5%. This so-called rate-lock effect could mean fewer homes listed, reducing inventory and driving prices up. Combined with rising mortgage rates, this scenario could further diminish affordability for many prospective buyers.