Average US Long-Term Mortgage Rate Inches Up to 6.93% This Week for Fourth Straight Increase
The average long-term mortgage rate in the United States has increased to 6.93%, marking the fourth consecutive week of upward movement, according to recent data from Freddie Mac. This persistent rise in rates highlights ongoing challenges for prospective homebuyers and the broader housing market.
Factors Driving the Increase
The rise in mortgage rates aligns with growing uncertainty about the Federal Reserve’s monetary policy. While the Fed paused rate hikes in its latest meeting, officials signaled a willingness to resume increases if inflation remains above target levels.
Higher rates have been driven by the Fed’s efforts to control inflation, which has resulted in a tighter lending environment. Coupled with elevated home prices, the higher mortgage rates are making it increasingly difficult for buyers to afford homes, especially first-time buyers.
Impacts on the Housing Market
The upward trend in mortgage rates is further straining affordability in a housing market that’s already grappling with limited inventory. Many homeowners who locked in ultra-low rates during the pandemic are hesitant to sell, reducing the supply of homes on the market. This scarcity, combined with higher borrowing costs, has kept home prices stubbornly high.
According to Freddie Mac’s Chief Economist Sam Khater, “This steady climb in mortgage rates is putting downward pressure on home sales, as affordability continues to be a significant hurdle for many Americans.”
Comparing to Historical Trends
While the current rate of 6.93% is high compared to recent years, it’s still lower than the peaks reached in the early 1980s, when mortgage rates exceeded 18%. However, for today’s buyers, the combination of high rates and elevated home prices represents a unique challenge.
What This Means for Buyers
Prospective homebuyers face a tough market. With fewer affordable homes available, many are turning to alternative options such as smaller homes, homes in less desirable areas, or renting. Some buyers are also considering adjustable-rate mortgages (ARMs), which typically offer lower initial rates but carry risks if rates continue to climb.
Broader Economic Implications
The rising mortgage rates not only impact individual buyers but also have broader economic repercussions. A sluggish housing market can dampen economic growth, as fewer home sales mean less spending on related goods and services, such as furniture and renovations.
Looking Ahead
While some analysts believe that mortgage rates could stabilize or even decrease if inflation trends downward, others caution that persistent economic uncertainty and potential Fed rate hikes could keep rates elevated for the foreseeable future.
For now, the advice for buyers is to carefully evaluate their financial situation, consider locking in rates if they’re planning to purchase soon, and explore all available options to mitigate costs.