US mortgage rates continued their upward trajectory this week, with the average 30-year fixed rate increasing to 7.4%, according to data from Freddie Mac. This is the highest level the key benchmark rate has reached since April 2002.
One year ago, the average 30-year fixed mortgage rate stood significantly lower at 5.13%. Rates have been on the rise since late May of this year when they first crossed above 6.5%. The surge in rates reflects a rapid shift in the macroeconomic environment.
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Fed to blame for rising mortgage rates?
The Federal Reserve has been aggressively raising its benchmark interest rate in an effort to combat high inflation. This has flowed through to US mortgage rates, which tend to increase with the direction of broader interest rates.
The mortgage rates reported each week by Freddie Mac aim to reflect the average interest rates available nationwide by gathering data on thousands of mortgage applications submitted to lenders. The specific 30-year fixed-rate average is calculated using only applicants with excellent credit and 20% down payments.
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Therefore, it does not represent rates offered to every borrower but provides a benchmark for pricing trends. The Federal Reserve does not directly control long-term rates. However, its monetary policy actions do substantially influence the direction of rates.