Mortgage Rates Surge Toward 7%, Rattling Housing Market

us mortgage rates increased to 7 percent
Jan 10, 2025 Reading time : 2 min

US mortgage rates have increased to 7%, posing a major threat for buyers eager to enter the housing market. According to data from Freddie Mac which was released on Thursday, as of January 2, the average rate for a 30-year mortgage rose to 6.91% from 6.85% in the previous week. 

Moreover, the Mortgage Bankers Association reported an increase of 8 basis points, bringing their measure close to 6.97% for the week ending December 27. These increased browsing costs are affecting affordability and have recently dampened demand. This happened because the MBA’s index of home-purchase applications dropped nearly 7% to its lowest point since mid-November. 

US mortgage rates rose to 7 percent

Although these figures account for seasonal variations, they remain susceptible to serious fluctuations during the holiday season. Odeta Kushi, the deputy chief economist at First American Financial Corp remarked, “It’s not the most encouraging way to kick off the new year. Experts in the industry are converging on the idea that 2025 will see prolonged high rates in the housing market. This isn’t promising news.”

Mortgage rates generally follow the trend of Treasury yields, which continued to rise in late December. The increase was after Federal Reserve officials pointed out that interest-rate reductions in 2025 have a slower approach because of persistent inflation.

In a Thursday announcement, Sam Khater, Freddie Mac’s chief economist stated, “Rates are significantly higher compared to this time last year, and the challenges to market affordability remain.”

Kushi noted that if mortgage rates get balanced, there are chances that it could ignite a housing recovery. Moreover, if the Fed moves ahead with cuts to its benchmark interest rate, it might allow mortgage rates to rise from their current heights. Separate data from the National Association of Realtors, despite the year-end increase in mortgage rates, indicates that potential homebuyers are becoming more acclimated to a higher-rate environment.

Staff Writer
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Staff Writer
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