Long-term mortgage rates in the United States have risen to their highest level in nearly a year, increasing borrowing costs for prospective homebuyers amid already tightening household budgets due to rising oil prices. The benchmark 30-year fixed mortgage rate climbed to 6.58% this week, up from 6.55% last week, according to data released Thursday by mortgage buyer Freddie Mac. This marks the highest rate since August 21, 2023, when it also stood at 6.58%. By comparison, the average rate one year ago was higher at 6.74%.

The increase in mortgage rates comes at a time when home sales have been sluggish, partially attributed to the higher borrowing costs. Rising rates can add hundreds of dollars monthly to homeowners’ expenses, reducing the purchasing power of buyers and prompting many to delay entering the market. The average rate on 15-year fixed-rate mortgages, often used by borrowers refinancing existing loans, also edged up this week, rising to 5.96% from 5.93% last week. A year ago, this rate was lower at 5.87%.

Mortgage rates are shaped by several factors, including Federal Reserve policies, economic outlook, inflation expectations, and movements in the bond market. They generally track the yield on the 10-year U.S. Treasury note, which serves as a benchmark for home loan pricing. The ongoing conflict in Iran has contributed to a surge in crude oil prices, fueling fears of higher inflation and influencing the upward trend in rates.

Earlier this year, mortgage rates had briefly dropped below 6% for the first time since late 2022, but have since resumed their increase. Although current long-term rates remain below the peaks seen last year, their recent rise continues to exert pressure on the housing market, affecting affordability and consumer behavior heading into the second half of 2024.