Mortgage rates in the U.S. climbed to their highest level in six months, raising concerns about the sustainability of recent home sales improvements. The average rate for a 30-year fixed-rate mortgage rose to 6.91% this week, up from 6.85% last week and 6.62% a year ago, according to Freddie Mac.
“Rates remain elevated compared to last year, presenting affordability challenges,” said Freddie Mac Chief Economist Sam Khater. Despite the Federal Reserve’s three interest rate cuts since September, mortgage rates have trended higher, tracking the 10-year Treasury yield. Investor concerns over President-elect Donald Trump’s policies, such as tax cuts and tariffs, have fueled inflation fears, further lifting yields.
Existing home sales reached an eight-month high in November, reflecting contracts signed earlier in the year when rates were lower. However, rising rates may dampen this momentum. December sales could see a boost from November’s 21-month high in new contracts.
The market faces additional headwinds from the “rate-lock effect,” where homeowners with mortgages below 5% hesitate to sell, limiting inventory. This supply constraint, combined with higher rates, could drive prices up further, worsening affordability for potential buyers.
While increased inventory has attracted more buyers recently, these opposing forces raise uncertainty about the housing market’s near-term trajectory.
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