US Mortgage Rates Hit Highest Level in Over a Year Amid Fed Rate Hike Expectations

US mortgage interest rates have reached their highest level in about a year, with the rate on a 30-year fixed-rate mortgage climbing to 6.76% last week.

This marks a 7 basis point increase from the previous week and is just shy of a one-year high, according to the Mortgage Bankers Association (MBA).

The rate on 15-year fixed-rate loans also rose significantly, increasing by 11 basis points to 6.15%, which is the highest it has been in over a year.

Meanwhile, rates on adjustable-rate mortgages (ARMs) also moved higher, with the 5-year ARM edging up to 5.98% last week.

The Federal Reserve's decision to raise interest rates later this month is expected to further push mortgage rates upward, with some economists predicting that rate hikes are imminent within the next two months.

The recent escalation of US-Iran tensions has driven up oil prices and inflation-sensitive Treasury yields, which have in turn contributed to the increase in mortgage rates.

As a result, mortgage application volumes have dropped significantly, with the MBA's mortgage market index falling 6.4% on a seasonally adjusted basis last week to its lowest level in a year.

The decline in refinance applications was particularly pronounced, with a 10% drop-off and a 13-month low in government refinances.

Joel Kan, the MBA's deputy chief economist, noted that 'this upward trajectory in rates continues to significantly impact refinance borrowers,' adding that higher rates have added to ongoing affordability challenges for homebuyers.