- The average 30-year fixed mortgage rate jumped to 7.12%, pushing borrowing costs to their highest level since May 2024 as higher Treasury yields weigh on the housing market.
US mortgage rates have moved back above 7%, adding another hurdle for homebuyers as elevated borrowing costs combine with high home prices and slowing housing demand. The average contract rate for a 30-year fixed mortgage rose 15 basis points to 7.12% during the week ended Sept. 18, according to the Mortgage Bankers Association. It was the highest rate since May 2024.
The latest increase follows a period of steadily rising borrowing costs. Freddie Mac's separate weekly measure had placed the average 30-year fixed rate at 6.95% for the week ended Sept. 17, up from 6.76% a week earlier.
The move above 7% is particularly significant because mortgage rates had briefly fallen below 6% earlier this year before rising sharply amid higher oil prices, inflation concerns, and changes in Treasury yields.
Why Are Mortgage Rates Rising Again?
Mortgage rates are closely tied to movements in the 10-year Treasury yield, rather than directly to the Federal Reserve's benchmark rate. The 10-year yield has remained near 5%, reflecting investor concerns about inflation and the outlook for monetary policy.
The Federal Reserve raised its benchmark interest rate by 25 basis points last week to a range of 3.75% to 4%, its first rate increase since 2023. Nearly all Fed policymakers also projected at least one additional increase before the end of the year.
Higher oil prices have added to the pressure. Energy costs can feed into inflation expectations, prompting bond investors to demand higher yields and indirectly increasing the cost of long-term borrowing.
Mortgage rates have risen by more than one percentage point since late February, when the US-Israel conflict with Iran sent energy prices higher and revived concerns about inflation.
Mortgage Applications Fall as Borrowers Turn to ARMs
Higher rates are already showing up in mortgage demand. Total mortgage applications declined 1.5% in the latest week, while refinance applications fell 3% and purchase applications declined 1% on a seasonally adjusted basis. Refinancing activity was 62% below the same week a year earlier.
At the same time, more borrowers are turning toward adjustable-rate mortgages. ARMs accounted for 9.8% of mortgage applications, up from 8.4% a week earlier. The average rate on a 5/1 ARM fell to 6.10%, more than a percentage point below the 7.12% average for 30-year fixed loans.
The latest data show how quickly the mortgage market has changed. Earlier in September, the MBA reported a 6.97% 30-year rate and an ARM share of 8.4%, meaning both the fixed mortgage rate and demand for adjustable loans moved higher within a matter of weeks.