There was a moment in late September when mortgage rates, after a monthslong decline, appeared poised to drop low enough to bring would-be buyers and sellers off the sidelines.
But that window has closed, at least for now.
The average rate on the 30-year mortgage, the most popular home loan in the United States, rose to 6.93 percent this week, Freddie Mac reported on Thursday, the highest since early July.
Mortgage rates tend to track the yield on 10-year Treasury bonds, which has jumped in response to a string of strong economic data, persistent inflation and a potential rise in debt and deficits stemming from policies on tax and spending that have been proposed by the incoming Trump administration.
“The economy has held up stronger and inflation has come down less than people had hoped,” said Stijn Van Nieuwerburgh, a professor of real estate and finance at Columbia University.
This week, the 10-year Treasury yield extended its monthslong rise, fueled by a range of factors including data showing the U.S. services sector expanded in December and President-elect Donald J. Trump reasserting his plans for tariffs on a broad range of imported goods, which many economists said would be inflationary. On Wednesday, the 10-yield briefly rose above 4.7 percent, hitting its highest level since April.
Inflation has recently proved stubborn, a sign that the Federal Reserve has not yet won its battle against rapid price increases. Last year, the Fed began to cut interest rates from the decadeslong highs they reached as officials tried to rein in stubborn inflation. The central bank cut rates three times last year, but it signaled only two reductions this year as inflation lingers.
Mortgage rates have been climbing even as the Fed has cut the short-term rate it controls. That divergence is largely because longer-term rates set by the market, including mortgages, reflect investors’ expectations of future economic conditions, rather than the Fed’s current decisions.
Jitters about inflation and an “unsustainable” path of government borrowing have contributed to the surge in long-term interest rates, taking mortgage rates along for the ride, said Greg McBride, the chief financial analyst at Bankrate. He expects mortgage rates to end 2025 around 6.5 percent.
The housing market has been stuck for years, with mortgage rates rising rapidly in 2022 and 2023, peaking close to 8 percent. Many homeowners have felt trapped by the low rates they secured early in the pandemic, when the average 30-year rate was around 3 percent, making them reluctant to list their homes for sale. The lack of supply has kept prices high, making it even more of a challenge for buyers facing spiraling mortgage rates.
Those looking to buy or sell might be forced to readjust to rates that remain stubbornly higher than they’d like. That shift in thinking is already underway, said Heather Mahmood-Corley, a real estate agent at Redfin in Phoenix. This week, one of her clients told her she was prepared to buy a house within three to six months, no matter the borrowing costs — a sentiment Ms. Mahmood-Corley said she had been hearing more often.
“A lot of people were waiting to see what happens with the new administration,” Ms. Mahmood-Corley said. “But I’ve also had a lot of buyers who are fine with these interest rates, and realized in 2025, they’re not going to go down like they’d hoped.”
More than just borrowing costs factor into whether and when to buy a house. Existing home sales climbed 4.8 percent in November, the latest data available, a sign that more buyers were jumping into the market. Solid growth in jobs and incomes has helped support some activity.
Ultimately, “this is just not an environment where you can sit back and expect that mortgage rates are going to drop in a substantial way and ease affordability concerns,” said Mr. McBride of Bankrate.
