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Mortgage rates inch closer to 7% to close out 2024

  • CNN
  • January 2, 2025
New York

CNN

 — 

Mortgage rates are climbing again, in yet another unwelcome sign to homebuyers.

The standard, 30-year fixed-rate mortgage averaged just shy of 7% in the final week of 2024 ending on January 2, according to data from mortgage financing giant Freddie Mac. That's the highest level in nearly six months and is also up from the prior week when mortgage rates averaged 6.85% versus the latest week's average of 6.91%. A year ago, mortgage rates averaged 6.62%.

The latest uptick in mortgage rates comes despite the Federal Reserve's quarter-point interest rate cut last month, its third cut of the year. However, the central bank lowered its outlook for the number of rate cuts it expects this year with inflation remaining above its 2% target and the labor market on solid footing.

While mortgage rates are directly impacted by actions the central bank takes, they are more closely aligned with the direction of 10-year US Treasury yields, which are a bellwether for mortgage rates. Over the past month, the 10-year Treasury yield has been steadily rising, partly due to the Fed's revised outlook as well as the government's widening debt burden, which many fear will continue to grow under a second Trump administration.

Homes near the Chesapeake Bay in Centreville, Maryland, on March 4.

Jim Watson/AFP/Getty Images

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"Compared to this time last year, [mortgage] rates are elevated and the market's affordability headwinds persist," Sam Khater, Freddie Mac's chief economist, said in a statement released Thursday.

Higher mortgage rates are keeping many would-be homebuyers on the sidelines. Mortgage applications decreased by 21.9% for the week ending December 27 compared to two weeks earlier, according to data the Mortgage Bankers Association published Thursday.

But that isn't so uncommon for this time of year, said Mike Fratantoni, MBA's chief economist. Around the holiday season, housing activity "typically grinds to a halt," he said in a statement on Thursday. That tends to result in "declines in both refinance and purchase applications."