The average rate on a 30-year mortgage in the U.S. ticked up this week to slightly above 7%, the highest level in eight months

ByALEX VEIGA AP business writer

The average rate on a 30-year mortgage in the U.S. ticked up this week to slightly above 7%, the highest level in eight months.

The rate rose to 7.04% from 6.93% last week, mortgage buyer Freddie Mac said Thursday. A year ago, it averaged 6.6%. It has risen for five straight weeks.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, also rose this week. The average rate increased to 6.27% from 6.14% last week. A year ago, it averaged 5.76%, Freddie Mac said.

The uptick in the cost of home loans reflects a rise in the bond yields that lenders use as a guide to price mortgages, specifically the yield on the U.S. 10-year Treasury. The yield on the 10-year Treasury has climbed from 3.62% in mid-September to 4.61% as of midday Thursday.

The elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers, prolonging a national home sales slump that began in 2022.

While sales of previously occupied U.S. homes rose in November for the second straight month, the housing market was on track to end 2024 as its worst year for sales since 1995. Full-year home sales data are due out next week.

The average rate on a 30-year mortgage is now the highest it’s been since May 9, when it was at 7.09%.

Interest rates have been climbing since the Federal Reserve signaled last month that it expected to lower its benchmark rate just twice this year, down from the four cuts it forecast in September.

The Fed is tapping the brakes on rate cuts because inflation remains stubbornly above the central bank’s 2% target, even though it’s fallen from its mid-2022 peak. Economists also worry that President-elect Donald Trump’s economic policies, notably his plan to vastly increase tariffs on imports, could fuel inflation.

Forecasting the trajectory of mortgage rates is difficult, given that rates are influenced by many factors, from government spending and the economy, to geopolitical tensions and stock and bond market gyrations.

Several economists’ forecasts call for the average rate on a 30-year mortgage to remain above 6% this year, with some including an upper range as high as 6.8%.