US mortgage rates rise for second week to highest since July

MORTGAGE rates in the US climbed for the second week in a row, squeezing homebuyers as borrowing costs hit the highest level since early July.

The average for a 30-year fixed loan was 6.85 per cent, up from 6.72 per cent last week, Freddie Mac said.

Mortgage rates have been hovering near 7 per cent in recent weeks. Despite the financial pressures, some buyers are forging ahead. Contracts to buy homes were up 4.1 per cent from a year earlier, according to Redfin data for the four weeks to Dec 15.

The new-home market is also holding up. Sales climbed in November, while inventory rose to the highest since the end of 2007, according to government data. “While a slight improvement in new and existing home sales is encouraging, the market remains plagued by an overwhelming undersupply of homes,” said Freddie Mac’s chief economist Sam Khater. “A strong economy can help build momentum heading into the new year and potentially boost purchase activity.”

Last week, the US Federal Reserve lowered its benchmark interest rate for a third time. Economists are expecting more cuts in 2025 given signs that some price pressures are easing. The central bank’s preferred measure of underlying inflation rose 0.1 per cent in November from a month earlier, the slowest monthly gain since May.

“On the plus side, we expect mortgage rates to ease and housing inventory to grow next year as builder activity and the weakening lock-in effect bring more homes to the market,” said Hannah Jones, a senior economic research analyst at Realtor.com. “However, still-limited home supply is expected to boost price growth, which means housing costs are likely to stay high.” BLOOMBERG