The average interest rate on a 30-year mortgage in the U.S. rises to 6.12%, the first increase in seven weeks

The average interest rate on a 30-year mortgage in the U.S. rose to 6.12% this week, the first increase in seven weeks.

The interest rate rose from 6.08% last week, mortgage buyer Freddie Mac said Thursday. A year ago the rate averaged 7.49%.

Last week, the average interest rate fell to its lowest level in two years, boosting homebuyers’ purchasing power as they navigate a real estate market with prices near all-time highs.

Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners looking to refinance their mortgage to a lower interest rate, rose again this week. The average rate rose to 5.25% from 5.16% last week. A year ago, it averaged 6.78%, Freddie Mac said.

Mortgage rates are influenced by several factors, including how the bond market responds to the Federal Reserve’s interest rate policy decisions. This could change the trajectory of the 10-year Treasury yield, which lenders use as a guide when pricing home loans. The yield on the 10-year Treasury note was at 3.82% on Thursday, up from 3.78% last week.

The average interest rate on a 30-year mortgage has fallen from 7.22% in May, its peak in 2024. Interest rates have mostly fallen since July as the Federal Reserve cut its benchmark interest rate last month for the first time in more than four years.

Fed officials also signaled they expect further rate cuts this year and in 2025 and 2026. The rate cuts are expected to result in lower mortgage borrowing costs over time.

Aside from this week’s rise in the average long-term interest rate, Sam Khater, Freddie Mac’s chief economist, painted a more optimistic picture for potential homebuyers.

“Looking at the bigger picture, mortgage rates have fallen one and a half percentage points over the last 12 months, housing price growth is slowing, inventory is increasing and incomes continue to rise,” Khater said. “As a result, conditions for homebuyers are improving this fall and are likely to continue for the remainder of the year.”

The average interest rate on a 30-year mortgage rose from under 3% in September 2021 to a 23-year high of 7.8% last October. This coincided with the Fed raising interest rates to combat inflation.

When mortgage rates rise, borrowers’ costs can increase by hundreds of dollars per month. The real estate market has been in a sales slump since 2022 as high mortgage rates deterred many potential home buyers. Sales of previously occupied U.S. homes fell in August even as mortgage rates began to decline.

Economists generally expect mortgage rates to remain near current levels at least this year. Fannie Mae forecasts that the interest rate on a 30-year mortgage will average 6.2% in the October-December quarter and fall to an average of 5.7% in the same quarter next year.