US mortgage rates hit a 9-month high - and they've been climbing since January as inflation fears rise

• The average 30-year fixed mortgage rate rose to 3.09% this week, its highest level since June.
• Rates have been rising since January as markets gird for economic reopening and stronger inflation.
• Still, demand for homes is handily outstripping supply as new construction fails to accelerate.

Mortgage rates continue to climb in the US as concerns of rising inflation counter past months' historically low borrowing costs.

The average 30-year fixed mortgage rate rose to 3.09% this week, according to data from Freddie Mac. That's the highest level since late June and compares to a reading of 3.05% one week prior. Still, the 30-year rate average sits well below its year-ago level of 3.65%.

The average 15-year fixed mortgage rate rose to 2.4% from 2.38% last week to hit, hitting its highest point since September.

Mortgage rates have steadily risen since January as investors position for stronger inflation as the economy rebounds. Treasury yields underpin a wide range of borrowing rates including those for home loans, and the recent sell-off in government bonds placed upward pressure on mortgage rates. The 10-year yield rose to a 14-month high following the Federal Reserve's March policy meeting on Wednesday, signaling rates will trend higher in the coming weeks.

The trend hasn't yet pushed potential buyers out of the market, Sam Khater, chief economist at Freddie Mac, said in a statement. While the 30-year average rate now sits well above its January floor of 2.65%, borrowing costs are still relatively low. Robust demand for new homes also signals the housing market boom has plenty of staying power, the economists said.

"Residential construction has declined for two consecutive months and given the very low inventory environment, competition among potential homebuyers is a challenging reality, especially for first-time homebuyers," Khater added.

More barriers than just higher mortgage rates

The housing market was one of the few pockets of the economy to see activity surge through the pandemic. The Federal Reserve's decision to cut interest rates to record lows one year ago dragged mortgage rates to historically low levels and spurred fresh demand.

But while interest rates remain near zero, mortgage rates have been more closely tracking Treasury yields. The near-zero rates that sparked the housing boom are no longer its primary driver.

New hurdles have emerged from the strained relationship between buyers and builders. Home prices shot higher as demand handily outstripped supply. And though rates have risen through the spring, contractors are still unable to keep up with the market.

That supply-demand imbalance is now forcing potential homebuyers to pay above listing prices just to secure a purchase. The sale-to-list price ratio tracked by Redfin rose to 100.1% for the week that ended March 7, its highest level since data collection began in 2016. The firm also found median sales prices for newly listed homes reached a record high and that new listings were down 17% year-over-year.

Even pricier materials are contributing to soaring home costs. The National Association of Homebuilders said last month that factory shutdowns last March slammed lumber supply chains and led to a spike in the commodity's price. Elevated lumber costs now add roughly $24,000 to the price of a new home, NAHB Chairman Chuck Fowke told HousingWire.