U.S. mortgage rates increased to a four-month high this week and could rise further amid fears that President-elect Donald Trump's proposed economic policies could stoke inflation. The average rate on the popular 30-year fixed-rate mortgage climbed to 6.79%, the highest level since July, from 6.72% last week, mortgage finance agency Freddie Mac said.
It has increased for six straight weeks and has risen by 71 basis points since late September. As supply remains below pre-pandemic levels, rising mortgage rates and elevated house prices have combined to stifle sales of previously owned homes, which hit a 14-year low in September.
The 30-year fixed mortgage rate tracks the benchmark 10-year Treasury note, whose yield jumped to a four-month high in the aftermath of Republican Trump's victory in the U.S. presidential race. Trump campaigned on a platform of tax cuts, which economists say would juice the economy, widen budget deficits and increase government borrowing. He also promised to impose a 60% tariff on Chinese goods and at least a 10% levy on all other imports, which economists expect to re-ignite inflation and reduce the Federal Reserve's scope to cut interest rates.
Most home owners have mortgage rates below 4% and the so-called "rate lock" is starving the market for previously owned homes of supply. Bright MLS estimated that the median monthly payment on a mortgage to buy a $400,000 home has increased by almost $200 in just six weeks.
