The average rate for a 30-year mortgage in the U.S. has climbed for the second consecutive week, reaching 6.85%, its highest level since mid-July. This increase mirrors a recent surge in bond yields, which lenders use as a benchmark for pricing home loans, according to Freddie Mac’s report on Thursday.

This week’s rate rose from 6.72% last week, and it’s up from 6.61% a year ago. The last time the 30-year mortgage rate was this high was the week of July 11, when it hit 6.89%. Earlier this year, rates ranged from a low of 6.08% in September—a two-year low—to a peak of 7.22% in May.

Economists predict that 30-year mortgage rates will stay above 6% throughout the next year, potentially reaching as high as 6.8%, aligning with the levels seen this year.

15-Year Fixed-Rate Mortgages Also Increase

Rates for 15-year fixed-rate mortgages, favored by homeowners looking to refinance, also rose this week. The average rate climbed to 6%, up from 5.92% last week. A year ago, it stood at 5.93%, Freddie Mac reported.

Impact on the Housing Market

Elevated mortgage rates, coupled with rising home prices, continue to make homeownership less accessible for many buyers. While sales of previously occupied homes in the U.S. increased in November for the second consecutive month, the housing market remains in a prolonged slump, on track for its worst performance since 1995.

Influencing Factors

Mortgage rates are shaped by multiple factors, particularly movements in the yield on 10-year Treasury bonds.

Last week, bond yields rose following the Federal Reserve’s indication that it expects to implement fewer rate cuts in 2024 than previously projected. While the Fed doesn’t directly control mortgage rates, its actions and inflation trends heavily influence the 10-year Treasury yield.

Currently, the yield, which was below 3.7% in September, has risen to 4.61% as of Thursday midday trading.

Outlook for 2024

The outlook for mortgage rates next year hinges on the economic impact of President-elect Donald Trump’s policy plans. If his initiatives lead to higher inflation or an increased national debt, mortgage rates could remain elevated. Factors such as inflation, the U.S. deficit, and the broader economy will continue to influence the trajectory of the 10-year Treasury yield, making it a key wildcard for mortgage rates in the coming year.