The average long-term U.S. mortgage rate reached its highest level in nearly nine months this week, raising the cost of borrowing for home buyers during what is traditionally the busiest season for the housing market, the AP reports.The average rate on a 30-year fixed mortgage rose to 6.51 percent from 6.36 percent last week, according to mortgage buyer Freddie Mac. Despite the increase, this rate remains below the level of 6.86 percent recorded a year ago.Mortgage rates have moved substantially higher since the Iran conflict began, the closure of the Strait of Hormuz is causing volatility in energy markets and crude oil prices are moving upward, a factor that could weigh on inflation expectations.Mortgage rates are generally influenced by many factors, including Federal Reserve policy decisions and bond-market expectations around inflation and economic growth. They often track fluctuations in the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans.Concerns over higher oil prices and rising government debt levels have also contributed to the rise in long-term bond yields.The yield on the US 10-year Treasury note stood at 4.6 percent in afternoon trading on Thursday, compared with 4.47 percent a week earlier and 3.97 percent in late February, before the conflict began.The cost of borrowing for 15-year fixed-rate mortgages, which homeowners often use to refinance their loans, has also become higher. Last week the average rate increased from 5.71 percent to 5.85 percent. A year ago this rate was 6.01 percent.Higher mortgage rates can significantly increase monthly costs for borrowers and reduce home affordability.As recently as late February, the average rate on a 30-year mortgage fell below 6 percent for the first time since the end of 2022. It has not retreated below that level and is now at its highest point since August 28, when it stood at 6.56 percent.The recent increase in borrowing costs has weighed on housing activity.Sales of previously occupied homes were largely unchanged last month after declining on a year-over-year basis during the first three months of the year, raising concerns about an extension of the broader housing recession that could begin into 2022 as mortgage rates moved above pandemic-era lows.Mortgage applications, including loans to buy and refinance homes, fell 2.3 percent last week to the lowest level in five weeks, according to the Mortgage Bankers Association.Rising borrowing costs have led more buyers to turn to adjustable-rate mortgages (ARMs), which typically offer lower initial rates than traditional 30-year fixed loans. Such products accounted for nearly 10 percent of mortgage applications last week, the highest level since October.At the same time, potential buyers are seeing some favorable trends as they continue to buy, including higher housing inventory and lower listing prices in many metro areas, especially in parts of the South and Midwest.“The spring season still offers real opportunities, although each increase in rates shrinks the pool of buyers who can make the numbers work,” said Anthony Smith, senior economist at Realtor.com.
