US Mortgage Rates Approach 7% in Ominous Sign for Housing Market

(Bloomberg) — U.S. mortgage rates are nearing 7%, threatening to squeeze buyers trying to break into the housing market.

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The average 30-year mortgage rate rose to 6.91% as of Jan. 2, from 6.85% a week earlier, according to Freddie Mac data released Thursday.The Mortgage Bankers Association estimate rose for the period ended Dec. 27 8 basis points to 6.97%, a nearly six-month high.

High borrowing costs have also weighed on demand recently, with the MBA home purchase index falling to its lowest level since mid-November, although the figures are adjusted for seasonal effects. they are still subject to wide fluctuations around year-end holidays.

“It’s not a great way to start the new year,” said Odetta Cushi, chief economist at First American Financial Corp. “Industry experts agree that 2025 is a longer and longer year for the housing market.” not great news.”

Mortgage rates tend to track Treasury yields, which continued to rise in late December after Federal Reserve policymakers forecast a slower pace of rate cuts in 2025 amid sticky inflation.

“Prices are up compared to this time last year, and market affordability headwinds remain,” Freddie Mac Chief Economist Sam Cutter said Thursday.

If mortgage rates stabilize, even at high levels, that could help start a housing recovery, Cushie said.

Despite rising mortgage rates at the end of the year, separate data from the National Association of Realtors showed that prospective homebuyers are becoming more acclimated to a higher interest rate environment.

In November, when interest rates averaged around 6.8%, the rate of contract signings for previously owned homes reached the highest level since February 2023. Demand was boosted by a rise in inventory.

The MBA survey, conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts, covering more than 75% of all residential mortgage applications in the US.

(Updates with Freddie Mac data starting in the first paragraph).

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