US 30-year mortgage rates rose 7%, the highest since May 2024.

By Anne Safir

(Reuters) – Interest rates on the most popular U.S. mortgage rose to an eight-month high of 7.09% last week, extending an upward trend as homebuyers are already facing rising home prices and tight supply.

The average contract rate on a 30-year fixed-rate mortgage fell 10 basis points on Jan. 10, the Mortgage Bankers Association said Wednesday.

It was the fifth straight weekly increase and kept the prime-mortgage rate a percentage point higher than it was in September, when the Federal Reserve began cutting short-term borrowing costs. It’s the season.

The Fed’s policy rate is now a full percentage point lower than it was then, but mortgage rates have moved in the opposite direction, tracking a sharp increase in Treasuries amid tight inflation and rising budget deficits.

President-elect Donald Trump enters the White House next week with an economic agenda that includes extending the 2017 tax cuts estimated to add trillions of dollars to the government debt. The U.S. budget deficit increased by $1.8 trillion last year, the largest since the Covid-19 era.

The Fed has been slow to cut interest rates this year amid fears of a slowdown in the pace of inflation toward 2% and uncertainty over how Trump’s policies, such as tariff hikes and immigration restrictions, will affect the economy.

A new reading on inflation came early Wednesday, with economists at the Labor Department reporting that the consumer price index rose 2.9% in December from a year earlier, compared with 2.7% in November.

(Reporting by Ann Safire; Editing by Leslie Adler)