Sept 3 (Reuters) - The average rate on the popular U.S. 30-year fixed-rate mortgage rose this week to its highest in more than a year, a fresh pain point for households already dealing with affordability challenges as a surge in energy prices amid renewed Middle East hostilities pushes up on inflation.
The 30-year fixed mortgage rate averaged 6.71%, up from 6.66% last week and the highest since July 2025, mortgage finance agency Freddie Mac said on Thursday.
Mortgage rates track U.S. Treasury yields, which have risen in recent weeks on concern that government borrowing may be outpacing its ability to repay those debts, as well as competition for capital from companies building AI-related infrastructure and worries the U.S.-Iran conflict will worsen price pressures.
Inflation by the Fed's targeted measure, the personal consumption expenditures price index, has been above the Fed's 2% target for about 5 1/2 years, and intensified earlier this year.
The yield on the benchmark U.S. 10-year Treasury note dropped on Thursday after Federal Reserve Governor Christopher Waller said he felt that, given the easing evident in the most recent two monthly readings on inflation, there may be no need for the central bank to raise rates this month, as financial markets had been expecting.
"Mortgage rates are not low, auto loans are not -- rates are not low," Waller said at a Reuters Next event in Washington. "And if I see housing's in the tank, new cars have gotten almost to be a luxury instead of a normal thing that a middle class family can do — that's not loose financial conditions."
Waller said he was encouraged by recent inflation readings and felt that more of the same in the upcoming readout on August inflation would leave him comfortable not raising rates at the Fed's September 15-16 meeting.
Thursday's decline in the 10-year yield, to 4.744%, followed a sharp increase on Wednesday to 4.818%, its highest since November 1, 2023.
Reporting by Ann Saphir, Howard Schneider; Editing by Andrea Ricci and Nick Zieminski
