US Mortgage Rates Hit Nearly Year-High Amid Rising Oil Prices

US mortgage interest rates have climbed to their highest in nearly a year, driven by rising oil prices and inflation-sensitive Treasury yields. The contract rate on a 30-year fixed-rate mortgage rose 7 basis points to 6.76% last week, just shy of its one-year high.

The Mortgage Bankers Association reported that the rate on 15-year fixed-rate loans climbed 11 basis points to 6.15%, while rates on adjustable-rate mortgages also moved higher.

With expectations building for further interest rate hikes by the Federal Reserve, mortgage rates are likely to remain high in the near term. The Fed's 2% inflation target was running at a 4.1% annual rate in May, and while it may have slipped back to 3.7% last month, renewed pressure on energy prices could keep upward pressure on Treasury yields.

Mortgage application volumes have taken a hit as rates rise, with the Mortgage Bankers Association's mortgage market index dropping 6.4% last week to its lowest in a year. Joel Kan, MBA's deputy chief economist, noted that refinance applications declined by 10%, including a steeper drop in government refinances.