Mortgage Rates Climb to Six-Month High as Borrowing Costs Weigh on Housing Demand

Rising interest rates and economic uncertainty are slowing homebuying activity despite year-over-year improvements.

By yourNEWS Media Newsroom

The average rate for a 30-year fixed mortgage in the United States rose to 6.38 percent, reaching its highest level in more than six months, according to a survey released March 26 by Freddie Mac.

The increase marks a jump from 6.22 percent the previous week, while the 15-year fixed mortgage rate climbed to 5.75 percent from 5.54 percent. The survey reflects conventional, conforming loans with a 20 percent down payment and strong borrower credit profiles.

Freddie Mac chief economist Sam Khater said recent conditions show mixed signals for the housing sector. “The housing market continues to show gradual improvements compared to a year ago amid recent rate volatility. Purchase and refinance applications are up year-over-year, and rates remain lower than last year when they averaged 6.65 percent,” Khater said.

Despite those gains, demand for mortgages declined for a second consecutive week as higher borrowing costs discouraged both homebuyers and homeowners seeking to refinance. Industry data indicate that applications fell as prospective borrowers delayed decisions in anticipation of more favorable rates.

Joel Kan, deputy chief economist and vice president at the Mortgage Bankers Association, said rising rates and affordability pressures are limiting activity. “The threat of higher for longer oil prices continued to keep Treasury yields elevated, and mortgage rates finished last week higher,” Kan said in a March 25 statement. “Higher mortgage rates, coupled with affordability constraints and economic uncertainty, pushed some potential homebuyers to the sidelines.”

Mortgage rates typically track movements in U.S. Treasury yields, particularly the 10-year benchmark. Since the onset of the conflict in Iran, the 10-year yield increased by approximately 40 basis points, surpassing 4.4 percent before easing slightly to around 4.34 percent. Longer-term yields, including the 20- and 30-year, have also retreated after approaching 5 percent, while the two-year yield fell below 3.9 percent.

Housing market activity remains subdued, with both buyers and sellers adjusting to current conditions. Many prospective buyers are waiting for lower borrowing costs or reduced economic uncertainty, while sellers have largely held firm on pricing. Data indicate there are approximately 46 percent more sellers than buyers, giving purchasers increased negotiating leverage.

Economists say geopolitical developments could further influence mortgage trends. Jeff DerGurahian, head economist and chief investment officer at loanDepot, said sustained increases in oil prices could contribute to broader inflation concerns and affect expectations for Federal Reserve policy.

“If elevated oil prices begin to fuel broader inflation concerns, markets could increasingly price in the possibility of Fed hikes over the next four meetings,” DerGurahian said in a note. “While it’s still too early to know the full impact on the spring housing market, any move closer to 6 percent would help affordability, and conditions could improve if tensions begin to ease.”

The combination of rising rates, affordability challenges and external economic pressures continues to shape the trajectory of the U.S. housing market as the spring buying season approaches.