Mortgage rates fall for 2nd straight week but remain elevated
The average rate on a 30-year fixed mortgage is 7.24%, Freddie Mac data showed.
Mortgage rates fell for a second consecutive week but remain elevated, according to Freddie Mac data released on Thursday, as a surge of inflation continues to weigh on financial markets.
The average interest rate on a 30-year fixed mortgage stands at 7.24%, marking a decline from a rate of 7.4% two weeks earlier. Still, mortgage rates register more than a percentage point above their level before the outbreak of the Iran war in late February, data from the financial company showed.
Until last month, the average rate on a 30-year fixed mortgage had last registered above 7% in January 2025.
Each percentage-point rise in a mortgage rate can impose thousands or tens of thousands of dollars in additional borrowing costs each year, depending on the price of the house.
The 10-year Treasury yield, a key long-term borrowing rate, hit its highest level in nearly two decades in September, just days after the Federal Reserve hiked benchmark borrowing costs. Since then, 10-year yields have eased but remain well above pre-war levels.
The Iran war set off a historic oil supply shortage that pushed up energy prices and trickled into other costs, including some groceries. The risk of a prolonged bout of inflation threatens to eat away at the value of long-term bond payments, which provide a fixed amount annually over 10 years or longer.
Bonds, in turn, have become less attractive for investors, causing yields to rise as buyers seek higher annual payouts to offset the increased risk. Financial markets are also anticipating the Federal Reserve will likely raise interest rates again next month, putting additional upward pressure on bond yields.
Speaking at a press conference in Washington, D.C., on Wednesday, Fed Chair Kevin Warsh acknowledged the rise in borrowing costs that followed a rate hike issued by the central bank last month.
"Since our policy action in September, we have started to see some changes in financial and credit conditions. They have tightened for some businesses and households, much as we would expect," Warsh said.
In recent months, a double-whammy of elevated prices and high mortgage rates has put homes out of reach for many buyers, some analysts previously told ABC News. Heightened economic uncertainty amid the Iran war has also paralyzed some buyers disenchanted by elevated consumer prices and a murky path forward for borrowing costs, they said.
Mortgage rates have also contributed to a phenomenon known as the "lock-in" effect, when rates remain well above those enjoyed by most current homeowners, who in turn may be reluctant to put their homes on the market and risk a much higher rate on their next mortgage.
Consumer prices overall rose at an annual rate of 3.7% in September, the most recent month on record, federal government data showed. Inflation stands more than a percentage point higher than the Federal Reserve's target rate of 2%.
An acceleration of price increases this year has posed a challenge for Fed officials tasked with containing inflation. The central bank raised interest rates a quarter of a percentage point last month in an effort to battle back price woes. The move marked the first rate increase in three years.
On Wednesday, the Fed opted to leave rates unchanged as they await further economic data.
Policymakers may lose patience as they weigh whether the current level of interest rates is high enough to ease price hikes. The odds of a quarter-point rate hike at the Fed's next meeting in December are pegged at about 85%, according to CME Group's FedWatch Tool, a measure of market sentiment.
Another potential rate increase may put upward pressure on mortgage rates as investors respond to the Fed's action.
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