The average interest rate on 30-year fixed-rate mortgages in the United States rose to 7.09% last week, reaching a new high in eight months. This uptrend in mortgage rates continues, putting more pressure on potential homebuyers who are already facing rising housing prices and limited inventory.
According to Reuters, the Mortgage Bankers Association in the United States reported on Wednesday, January 15th, that the average contract interest rate for the most popular housing loan, the 30-year fixed-rate mortgage, increased by 10 basis points in the week ending January 10th.
This marks the fifth consecutive week of increase and brings this key housing loan rate nearly one percentage point higher than in September last year when the Federal Reserve began cutting rates to reduce short-term borrowing costs.
While the Fed’s current policy rate is a full percentage point lower than when it cut rates in September last year, mortgage rates have moved in the opposite direction. Concerns about stubborn inflation and rising budget deficits have driven U.S. Treasury yields higher, leading to an increase in mortgage rates as well.
President-elect Trump will take office next week, and his economic agenda includes extending the tax cuts he introduced in 2017, which is estimated to add trillions of dollars to the government debt. Last year, the U.S. budget deficit exceeded $1.8 trillion, marking the highest level since the pre-COVID-19 era.
The Fed has signaled a slowdown in rate cuts this year amid concerns that the U.S. economy may struggle to achieve its 2% inflation target and uncertainty about how the policies of the incoming Trump administration, such as raising tariffs and restricting immigration, will impact the economy.