US Mortgage Rates Top 7% for First Time in Over a Year

US mortgage rates have surpassed 7% for the first time since January 2025, according to federal lender Freddie Mac. This increase comes after the US Federal Reserve raised interest rates for the first time since 2023, citing high inflation.

The average 30-year fixed-rate mortgage leaped to 7.03% on Thursday, marking a significant milestone in over a year. The rise in rates is expected to further squeeze homebuyers' budgets and deepen the freeze on the housing market, which has been stagnant for years due to high costs of homeownership.

The Federal Reserve's rate hike last week by a quarter percentage point was its first move this year. Many policymakers projected it may raise rates one more time before year's end. Investors are bracing for potentially even more rate hikes to combat inflation.

High mortgage rates have contributed to a 2% decline in existing home sales in August from the previous month, according to the National Association of Realtors. The median sale price for an existing home was about $429,000. At that price, a single percentage point increase in the mortgage rate can cost buyers hundreds of additional dollars a month and tens of thousands over the life of the loan.

The housing market slowdown has been exacerbated by rising borrowing costs and affordability challenges. As fixed rates continued to climb, more buyers opted for riskier adjustable-rate mortgages, which offer a lower initial rate. The 10-year Treasury yield, which underpins mortgage rates, has also spiked in recent weeks due to concerns over inflation, government debt, and higher borrowing costs.

The economic impact of high mortgage rates is expected to show up in the upcoming midterm elections as Republicans struggle to maintain control of Congress. Nearly three-quarters of Americans disapprove of Trump's handling of the economy, according to a recent CNN poll conducted by SSRS, and two-thirds of registered voters rate the economy as “extremely important” to their vote.

The housing market has been stuck in a rut this year due to elevated mortgage rates, which have been climbing since late February. Mortgage applications fell 1.5% last week from the previous week, marking the third straight weekly drop, according to the Mortgage Bankers Association. Applications for loans to refinance existing mortgages also declined, falling to their slowest pace since February 2025.

The elevated mortgage rates are driving more prospective homebuyers to adjustable-rate mortgages (ARMs), which accounted for nearly 10% of all mortgage applications last week. The average rate on a 15-year fixed-rate mortgage, often sought by borrowers refinancing a home loan, increased this week to 6.42% from 6.26% last week.