Mortgage rates in the USA are rising again – new Fed forecasts play a role

After three consecutive weeks of decline, US mortgage rates have risen again this week, a trend that could continue after the Federal Reserve indicated fewer rate cuts for 2025. This decision led to an increase in the yield of the 10-year US Treasury bonds. The average rate for the popular 30-year fixed mortgage rose from 6.60% last week to 6.72%, as reported by the mortgage financing agency Freddie Mac on Thursday. This rate nearly reached the same level as this time last year, when it averaged 6.67%. Freddie Mac's chief economist, Sam Khater, pointed out that mortgage rates have mostly ranged between 6 and 7 percent over the past year. On Wednesday, while the US central bank lowered its benchmark rate by 25 basis points to a range of 4.25% to 4.50%, it announced only two rate cuts for 2025. The reasons are the sustained strength of the US economy and persistently high inflation. In September, the Fed had forecasted four rate cuts. The latest projections also reflect the uncertainties about future policy measures of the new administration of President Donald Trump, including planned tariffs on imported goods and tax reliefs. According to economic experts, these could be inflationary. The yield on the 10-year US Treasury bonds reached a new 6.5-month high on Thursday. Since mortgage rates are strongly correlated with these bond yields, rising mortgage rates are a direct consequence. Additionally, the National Association of Realtors reported on Thursday an increase in existing home sales in November, which were mainly due to contracts signed in September when mortgage rates fell as part of the Fed's monetary easing.