Mortgage Rates Surge to 6.85% - What This Means for Homebuyers in 2024!

In a concerning trend for homebuyers, the average rate on a 30-year mortgage in the United States has climbed to 6.85%, marking the highest point since mid-July. This increase comes on the heels of rising bond yields, which are a key indicator used by lenders to determine mortgage pricing.

According to mortgage buyer Freddie Mac, the average rate jumped from 6.72% just a week ago. To put this into perspective, one year ago, the standard rate was 6.61%. The recent spikes in rates highlight the volatility in the housing market, where the average rate reached a peak of 6.89% the week of July 11 but also fell to as low as 6.08% in September—a two-year low—before rebounding.

Looking ahead, most economists predict that mortgage rates will remain above 6% for the foreseeable future, with some projections suggesting rates might hover around 6.8%. These figures echo the unsettled nature of the current housing market.

Additionally, the average rate on 15-year fixed-rate mortgages, popular among those refinancing, has increased to 6% from last week’s 5.92%. This is a substantial jump from the 5.93% average recorded a year ago.

The combination of high mortgage rates and escalating home prices is creating substantial barriers for potential homebuyers. Despite a slight increase in sales of previously owned homes in November, the overall market is struggling and is on course for its worst performance since 1995.

Several factors influence mortgage rates, with fluctuations in the yield of U.S. 10-year Treasury bonds being a primary contributor. Last week, bond yields surged following signals from the Federal Reserve regarding fewer anticipated rate cuts next year than previously expected. While the Federal Reserve does not directly set mortgage rates, its decisions and the overall inflation trajectory play significant roles in how these rates are determined.

As we approach 2024, one major concern is the economic policies expected from President-elect Donald Trump. Analysts are keenly observing whether his proposals will lead to higher inflation and increase the national debt, both of which could keep mortgage rates elevated. These factors directly impact the 10-year Treasury yield, which has seen volatility—rising to 4.61% recently from below 3.7% in September.

For prospective homebuyers, navigating this turbulent landscape will require careful financial planning and consideration. As mortgage rates continue to rise, the dream of homeownership might remain elusive for many Americans. Stay tuned for updates as the market evolves!