In an eye-watering development for the housing market, the average rate on a 30-year mortgage in the U.S. has skyrocketed to 6.85%, marking the highest level since mid-July. This increase, reported by mortgage buyer Freddie Mac, follows a previous rise to 6.72% just last week. To put this into perspective, rates are significantly higher than one year ago when the average stood at 6.61%.

This latest spike in mortgage rates is directly attributable to a surge in bond yields, which lenders closely monitor to determine home loan pricing. In fact, the current rate has reached heights not seen since the week of July 11, when it peaked at 6.89%. Earlier in September, rates had dipped to a low of 6.08%, a two-year minimum, but the marketplace has seen an overarching trend upwards, with rates climbing as high as 7.22% in May.

Experts are anticipating that mortgage rates will remain above the 6% mark well into next year. Some forecasts suggest that rates may hover around 6.8%, consistent with this year's fluctuating values.

Notably, the increase isn't just confined to 30-year fixed mortgages. The average rate for 15-year fixed mortgages, often favored by homeowners wanting to refinance, also inched up from 5.92% to 6%. Compared to last year, when it averaged only 5.93%, the current climb adds to the financial burden of potential homebuyers.

The continued rise in borrowing costs, coupled with the persistence of high home prices, has increasingly alienated numerous first-time buyers from homeownership. Although there was a slight uptick in the sales of previously occupied homes in November–for the second consecutive month—real estate experts warn that the housing market is on track for its worst yearly performance since 1995.

Several key factors guarantee that mortgage rates will remain a moving target: the yield on U.S. 10-year Treasury bonds, inflation, and the Federal Reserve's monetary policy decisions. Recently, yields increased following signals from the Federal Reserve that future interest rate cuts may not be as aggressive as previously hinted.

What makes the outlook even more precarious is the suspense surrounding President-elect Donald Trump’s proposed economic policies. There's a widespread concern that these might contribute to heightened inflation and escalate the national debt, both of which could inherently keep mortgage rates high.

In midday trading on Thursday, the Treasury yield, which had been below 3.7% in September, rose to 4.61%. This puts potential homebuyers in a challenging conundrum: purchasing now at a higher rate or waiting for uncertain market fluctuations. The looming question remains—what will be the best financial strategy moving forward in a turbulent housing market?