The average interest on 30-year mortgages in the United States reached 7.28% on October 1, the highest level since November 2023. The rise is due to the conflict in the Middle East and concerns about inflation.
The average interest rate on fixed-rate 30-year mortgages in the United States stood at 7.28% on October 1, according to vietnam.vn. This is the highest level since November 2023 and represents another blow to an already weakened housing market.
Since the outbreak of the conflict in the Middle East at the end of February, mortgage rates have risen by approximately 1.3 percentage points, a trajectory closely following the yield on long-term Treasury bonds.
The increase is partly explained by a wave of selling in the US public debt market. Investors fear that a prolonged war in the Middle East will accelerate inflation and force the Federal Reserve to keep official interest rates high for longer.
The yield on the 10-year Treasury bond, a benchmark for setting mortgage interest rates, remained near its highest level in 24 years on October 1. Since the end of February, it has risen by around 1.3 percentage points, almost exactly the same as mortgage rates.
Lenders use the yield on the 10-year bond as a basis for calculating the interest they charge on mortgage loans, as it reflects investors' expectations regarding inflation, interest rates, and long-term economic trends.
Concerns about inflation have intensified due to rising energy costs. On September 20, the retail price of diesel in the United States surpassed $6.50 per gallon for the first time. The average price of gasoline has remained above $4 per gallon since mid-July.
These pressures could lead the Federal Reserve to keep rates high for longer. Some economists argue that the rate hike approved by the central bank in September risks cooling the labour market, which stagnated in June and July before recovering better than expected in August.
The US government also issues 30-year bonds, but 10-year bonds are the benchmark for setting mortgage rates. According to Lawrence Yun, chief economist of the National Association of Realtors, the yield on the 10-year bond reflects market expectations regarding inflation and growth.
After years of waiting for a drop in mortgage rates, homebuyers in the United States now face the possibility of further increases. The already weakened housing market could face additional pressure if the conflict in the Middle East continues and keeps energy prices high.
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