Borrowing costs for homebuyers rose again this week as the national average 30-year fixed mortgage rate reached its highest level in nearly twelve months, a development that stands to affect buyers and sellers across the Colorado Springs market.

The benchmark 30-year fixed rate rose to 6.58% from 6.55% the prior week, according to mortgage buyer Freddie Mac. The rate has now ticked higher three weeks in a row. It is the highest the average 30-year rate has been since August 21, when it also sat at 6.58%.

Borrowing costs on 15-year fixed-rate mortgages, often sought by borrowers refinancing a home loan, also rose, with that average increasing to 5.96% from 5.93% the week prior — up from 5.87% a year ago, Freddie Mac said.

Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting purchasing power, and as rates rise, prospective home shoppers may delay buying — one reason U.S. home sales have been sluggish this year. Seasonally adjusted sales of previously occupied U.S. homes were up just 0.7% from January to June compared to the same period last year, still hovering near a 4-million annual pace, far short of the historic norm closer to 5.2 million.

Rates have been mostly rising this year as conflict in Iran has driven crude oil prices sharply higher, stoking expectations of hotter inflation and pushing up long-term bond yields relative to where they were before the conflict began in late February. The 10-year Treasury yield stood at 4.7% at midday Thursday, up from 4.57% a week earlier and well above the 3.97% recorded in late February before the conflict began.

Mortgage rates are influenced by several factors, including the Federal Reserve's interest rate policy decisions and bond market investors' expectations for the economy and inflation, and they generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. Rising oil prices, as violence escalates in Iran, threaten to worsen inflation just as it had begun to decelerate more than economists expected, which in turn could push the Federal Reserve to raise interest rates.

The trend extends a national housing market slump that began in 2022 when mortgage rates started climbing from pandemic-era lows, with sales of previously occupied U.S. homes essentially flat last year and stuck at a 30-year low. Lisa Sturtevant, chief economist at Bright MLS, said elevated rates will mean a slower summer housing market, noting that "it's not just about rates for homebuyers, but rather the full financial picture of buying," with record-high home prices, higher gas costs, and inflation concerns creating "more financial strain for would-be buyers."

Whether the Federal Reserve adjusts its interest rate policy in response to renewed inflation pressures — and how that ripples into local home loan costs — remains the key development to watch in the weeks ahead.