WASHINGTON — Mortgage rates climbed to their highest level in nearly a year this week as escalating tensions between the United States and Iran fueled investor concerns over inflation and rising oil prices.
The average rate on a 30-year fixed mortgage increased to 6.58% through Wednesday, up from 6.55% a week earlier, according to Freddie Mac. The average rate on a 15-year fixed mortgage rose to 5.96% from 5.93%.
The increase came as the yield on the 10-year U.S. Treasury note, which mortgage rates closely follow, moved higher amid heightened geopolitical uncertainty. Oil prices also climbed above $100 per barrel on Thursday for the first time since May, raising concerns that higher energy costs could reignite inflationary pressures.
Inflation Risks Reintroduced
“Renewed geopolitical tensions have reintroduced inflation risks, pushing mortgage rates to their highest level in nearly a year, and threatening to turn recent housing market affordability tailwinds into headwinds,” Zillow Senior Economist Kara Ng said in a statement.
Despite higher borrowing costs, demand from prospective homebuyers has shown signs of resilience.
Mortgage applications for home purchases rose 6% from the previous week through Friday, according to the Mortgage Bankers Association.
“As inventory improves in many markets, more prospective buyers are finding opportunities to enter the market even as borrowing costs remain elevated,” Mortgage Bankers Association President and CEO Bob Broeksmit said in a statement.
Housing economists have said that an increase in the number of homes for sale in many markets has helped offset some of the affordability challenges created by elevated mortgage rates, although the latest increase in borrowing costs could slow momentum if rates remain high.
