Estimated read time: 2-3 minutes
- Mortgage rates in the U.S. have risen above 7%, impacting homebuyers.
- Economists attribute the increase to inflation concerns and economic strength.
SALT LAKE CITY — Mortgage rates are once again above 7% after climbing for weeks.
A 30-year fixed-rate mortgage in the U.S. averaged 7.04% as of Thursday, according to Freddie Mac's survey results, up from last week's average rate of 6.93%. A year ago at this time, the same type of mortgage averaged 6.60%.
"This is clearly bad news for would-be homebuyers," said Phil Dean, chief economist at the University of Utah's Kem C. Gardner Policy Institute. "Higher interest rates translate into higher monthly payments."
And that, Dean said, will "worsen Utah's already challenging housing affordability situation."
Mortgage rates have been climbing steadily since dropping to a national average of 6.6% on Dec. 12. That average was at its lowest point last year in mid-September at 6.09% but had reached as high as 7.22% in early May.
"Mortgage rates ticked up for the fifth consecutive week and crossed 7% for the first time since May of 2024," said Sam Khater, Freddie Mac's chief economist, in a statement. "The underlying strength of the economy is contributing to this increase in rates."
Dean said the cause "all boils down to lingering concerns about inflation, which bumped up again toward the end of 2024. Lenders want to receive an inflation-adjusted return, so higher inflation means higher interest rates."
That's helped keep mortgage rates more than twice as high as they were during the COVID-19 pandemic, even as the Federal Reserve cuts interest rates. There were three reductions last year in the borrowing rate, and the Fed has signaled two may be coming in 2025.
Dean said mortgage rates could head back down.
"Future mortgage rate drops will likely tie closely with inflation readings and other economic conditions moving forward," he said. "If inflation trends downward," as it did earlier in 2024, "rates could come down again."
Also, the yield on long-term Treasury bonds has fallen slightly in the past few days, Dean pointed out, "so mortgage rates may follow."
But with President Donald Trump set to take office Monday, "there's still a lot of price uncertainty with potential policy changes," he said. "I'm interested to see what policy changes actually take effect as the new administration transitions into governance."
