Rising Treasury yields, geopolitical instability, and elevated borrowing costs are weighing on homebuyer demand as mortgage rates reach a nine-month high during the spring housing season.
By yourNEWS Media Newsroom
Long-term mortgage rates in the United States climbed this week to their highest levels in nine months, adding further pressure to an already strained housing market and slowing buyer activity during what is traditionally the busiest period of the year for home sales.
Freddie Mac reported Thursday that the average rate on a 30-year fixed mortgage rose to 6.51%, up from 6.36% the previous week. The increase pushed borrowing costs to their highest point since late August, when rates averaged 6.56%.
The benchmark mortgage rate had briefly fallen below 6% in February for the first time since 2022, but rates have since moved steadily higher amid broader financial market concerns tied to inflation, government debt, and geopolitical instability.
Despite the recent increase, the current average remains slightly below the 6.86% level recorded at the same time last year.
Shorter-term mortgage borrowing costs also increased.
Freddie Mac said the average interest rate on a 15-year fixed mortgage — commonly used for refinancing — climbed to 5.85% this week from 5.71% the week before. One year ago, the average 15-year rate stood at 6.01%.
New data from the Mortgage Bankers Association indicated the higher borrowing costs are beginning to weaken buyer demand.
The MBA said the average rate on a 30-year mortgage rose to 6.56% during the week ending May 15, while overall mortgage applications fell 2.3% compared to the previous week, reaching their lowest level in five weeks.
The report also showed that a growing share of borrowers are turning to adjustable-rate mortgages in an effort to reduce monthly costs. Nearly 10% of home loan applicants selected adjustable-rate products, which were being offered at rates approximately 80 basis points lower than standard fixed-rate mortgages.
Real estate brokerage Redfin reported similar signs of cooling demand across the housing market.
According to Redfin, pending home sales declined 1.1% during the week ending May 17, marking the first weekly drop since early April.
Chen Zhao, Redfin’s head of economics research, said the higher rates may simultaneously reduce competition among buyers who remain financially capable of purchasing homes.
“It’s already a buyer’s market, and this week’s jump in mortgage rates may give house hunters with stable incomes another opportunity to negotiate a home’s price down and get concessions from sellers,” Zhao said.
Mortgage rates are heavily influenced by movements in the 10-year U.S. Treasury yield, which lenders use as a key benchmark when pricing long-term home loans.
Treasury yields have climbed sharply in recent weeks as investors react to escalating conflict involving Iran, including disruptions tied to the closure of the Strait of Hormuz, one of the world’s most important energy shipping corridors.
Financial markets have also faced growing concern over rising sovereign debt levels in the United States and other major economies, adding further upward pressure on long-term bond yields.
The yield on the 10-year Treasury note reached 4.6% during midday trading Thursday, up from 4.47% one week earlier. Before the Iran conflict escalated earlier this year, the benchmark yield stood at 3.97% in late February.
Housing analysts say the combination of higher rates, elevated home prices, and ongoing economic uncertainty continues to create affordability challenges for many prospective buyers despite increasing inventory in some markets.
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