The average weekly mortgage rate topped 7% Thursday for the first time since January 2025, reflecting persistent inflation pressures and adding to the pressure on homebuyers.
Mortgage giant Freddie Mac reported that the rate for a 30-year, fixed-rate loan reached 7.03%. That’s up from 6.95% a week earlier and 6.3% a year ago.
The rate for a 15-year, fixed-rate mortgage also rose, to 6.42%. It was 5.49% a year ago.
Rates rose in response to comments from the Federal Reserve suggesting that a second interest rate hike is likely before the end of the year to tame inflationary pressure. The Fed raised its key rate that week for the first time since 2023.
This week, there were more signals from Fed leaders that another rate increase was coming. That led to a jump on Wednesday in the more reactionary daily 30-year mortgage rate from 7.17% to 7.26%.
“We had Fed speakers reminding us that if the economy proved to be hotter than expected, the rate hike outlook shared at last week's Fed announcement would be ‘too low,’” Matthew Graham, Mortgage News Daily chief operating officer, said in a Wednesday blog post. “The result was a rapid shift in Fed rate expectations for next year.”
Demand cools
Inflation, the war in Iran, rising mortgage rates and home prices that continue to climb across much of the country have weighed heavily on buyers, even as the broader economy has remained resilient. The U.S. median home price rose 2.1% year over year to $395,000 in August, even as home sales fell 4.3%, Homes.com exclusive data reports.
Despite the rate rise, Freddie Mac struck a positive note.
“The housing market remains supported by a solid labor market and an economy that is growing at a healthy rate,” the organization said in a statement posted on its website.
But rising mortgage rates continue to deter some homebuyers.
"With mortgage rates this high, we're just going to run out of people who say, 'I need to get into the right house regardless of mortgage rates,'" Brad Case, Homes.com News chief residential economist, said in a previous interview. "We're going to get back to a situation where people are saying, 'I'd love to buy, but not at rates this high.'"
Another indicator of where the housing market is headed at the moment came yesterday with the Mortgage Bankers Association’s weekly report about loan applications. The group said applications were down for the third straight week, and both home purchases and refinances saw a decline from a year ago.
“Prospective homebuyers … remained cautious in the face of higher borrowing costs,” Bob Broeksmit, MBA president, said in a statement Thursday.
This story was originally reported by David Holtzman for Homes.com News.