U.S. mortgage rates rose this week, after the Federal Reserve re-engaged in its war on inflation. The average rate on 30-year mortgages climbed to 7.09 percent this week, up from 6.98 percent last week, according to Bankrate’s weekly national survey of large lenders.
After taking a break from inflation fighting last month, the Fed resumed rate increases when it met last week. The central bank announced a widely anticipated quarter-point increase in interest rates.
While the Fed doesn’t directly set fixed mortgage rates, it does set the tone — and as the central bank has boosted its policy rate from zero in early 2022 to 5.25 percent now, mortgage rates have risen sharply. “This is the most aggressive raising of interest rates in 40 years,” said Lawrence Yun, chief economist at the National Association of Realtors.
Mortgage rates remain chained to inflation, a metric the Fed has been moving to control. Meanwhile, the most relevant benchmark is the 10-year Treasury yield, which topped 4 percent on Wednesday — its highest level of 2023.
“Further disinflation in the coming months should help support more, albeit modest, downward movements in Treasury yields, which mortgage rates tend to follow,” says Orphe Divounguy, senior economist at Zillow.