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Key US mortgage rate hits 9-month high, Freddie Mac says

BY Reuters | AGENCY | 12:00 PM EDT

May 21 (Reuters) - The interest rate on the most popular U.S. home loan shot to its highest since August this week as yields on the government bonds most influential in setting residential borrowing costs have climbed on concern about the inflation being aggravated by the war with Iran.

Home financing giant Freddie Mac on Thursday said the rate on the 30-year fixed-rate mortgage climbed to an average of 6.51% as of Thursday from 6.36% last week. The 15-basis-point jump was the largest in eight weeks.

The yield on the 10-year U.S. Treasury note, used as a benchmark for setting consumer mortgage costs, has risen from around 4% in late February before the U.S. and Israel launched air strikes on Iran, to more than 4.60% now. That has pulled the 30-year mortgage rate from just below 6% before the conflict began - then the lowest since September 2022 - to the latest level above 6.50%. (Reporting By Dan Burns)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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