US Mortgage Rates Hit 20-Month High Amid Inflation Fears
Mortgage rates in the US have reached their highest level in 20 months, according to Freddie Mac data. The average interest rate on a 30-year fixed mortgage now stands at 7.03%, up from around 6% since the Iran war began. This marks a significant increase, with rates last above 7% in January 2025.
The rise in mortgage rates coincides with an uptick in oil prices and Treasury yields, which closely track mortgage rates. A key Treasury rate hit its highest level in nearly two decades on Wednesday, just days after the Federal Reserve hiked benchmark borrowing costs. The Iran war has led to a historic oil shock, pushing up energy prices and other costs like groceries.
The risk of prolonged inflation threatens the value of long-term bond payments, making them less attractive for investors. This has caused yields to rise as buyers seek higher annual payouts to offset increased risk. Financial markets are anticipating another interest rate hike from the Federal Reserve next month, adding upward pressure on bond yields.