Mortgage Rates Surge to Highest Levels Since July, Continuing Upward Trend

Mortgage rates have surged once again, with 30-year new purchase mortgages reaching an average of 6.57% on Monday, marking the highest level seen in over two months. This increase follows a significant drop last month, when rates fell to a two-year low of below 6%. The upward trend in mortgage rates is evident across various loan types, as most new purchase mortgage rates also experienced increases on the same day.

The latest rise in 30-year mortgage rates saw an increase of 14 basis points, bringing the average to 6.57%. This figure is the highest since July 30 and represents a climb of 68 basis points since the two-year low of 5.89% recorded on September 17. While current rates remain below the July peak of 7.08%, they are still approximately 1.4 percentage points lower than the historic high of 8.01% reached last October.

Similarly, rates for 15-year mortgages have also risen, with an increase of 16 basis points leading to a new average of 5.61%. This average had previously hit a two-year low of 4.97% in mid-September. Despite the recent uptick, current 15-year rates are nearly 1.5 percentage points lower than last fall's peak of 7.08%, which was the highest average since 2000.

In the jumbo loan category, 30-year rates climbed 15 basis points to an average of 6.73%. On September 18, jumbo rates had dipped to 6.24%, the lowest since February 2023. Historical data suggests that the peak of 8.14% seen last fall was the highest jumbo 30-year average in over two decades.

Freddie Mac, a government-sponsored buyer of mortgage loans, publishes a weekly average of 30-year mortgage rates every Thursday. Last week, their reading rose by 4 basis points to 6.12%, while the previous week's average of 6.08% was the lowest since September 2022. The peak average recorded by Freddie Mac was 7.79% last October, marking a historic 23-year high.

It is important to note that Freddie Mac's average differs from other reported averages, as it is calculated based on a blend of rates from the previous five days. In contrast, the Investopedia average is a daily reading, providing a more immediate reflection of rate movements. Additionally, the criteria for included loans varies between Freddie Mac's methodology and others, affecting the averages reported.

For those looking to understand their potential monthly payments, our Mortgage Calculator can assist in evaluating different loan scenarios.

When considering mortgage rates, it’s essential to recognize that the rates advertised online may not reflect the actual rates borrowers will receive. Teaser rates are often based on ideal scenarios, such as borrowers with excellent credit scores or smaller loan amounts, and may involve upfront costs. The final rate secured will depend on various factors, including credit score and income.

The fluctuations in mortgage rates are influenced by a combination of macroeconomic and industry factors, including:

• The performance of the bond market, particularly 10-year Treasury yields.
• The Federal Reserve's monetary policy, especially regarding bond purchases and government-backed mortgages.
• Competition among mortgage lenders and across different loan types.

Given the complexity of these factors, it can be challenging to pinpoint a single cause for rate changes. The mortgage market remained relatively low for much of 2021, largely due to the Federal Reserve's bond-buying initiatives in response to economic pressures from the pandemic. However, starting in November 2021, the Fed began tapering its bond purchases, leading to significant rate increases over the following months.

Between November 2021 and July 2023, the Fed raised the federal funds rate aggressively to combat inflation, which indirectly influenced mortgage rates. Although the federal funds rate does not directly determine mortgage rates, the rapid increases have had a notable impact on the mortgage market.

As of July 2023, the Fed maintained the federal funds rate at its peak for nearly 14 months, but on September 18, they announced the first rate cut in what is anticipated to be a series of reductions in 2024 and possibly 2025. The next announcement regarding rates is scheduled for November 7.

The national and state averages mentioned are provided through the Zillow Mortgage API, assuming an 80% loan-to-value (LTV) ratio and a credit score in the 680–739 range. These rates reflect what borrowers can expect when receiving quotes from lenders, which may differ from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.

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