Lenders establish mortgage interest rate buffers under economic uncertainty

As of December 6, 2024, the average interest rate of 30-year fixed-rate mortgage (FRM) was 6.69%, and the average interest rate of 15-year FRM was 5.96%, both of which were slightly lower than the previous period. The 10-year Treasury bond interest rate is 4.17%, resulting in a risk premium spread of 2.52% higher than the 30-year FRM, above the historical average of 1.5%, indicating that lenders are cautious in the face of potential economic risks. Adjustable rate mortgages (ARM) have an average interest rate of 6.33%, below the 30-year FRM but above the 15-year period, which reduces its appeal to most home buyers. Higher mortgage rates limit purchasing power, curb demand and force sellers to adjust prices.