Mortgage Rates Top 7% for First Time in Over Two Years
The 30‑year fixed‑rate mortgage surpassed 7% for the first time in more than two years, reaching 7.12% in the week ending September 18. The rise follows a sharp jump in the 10‑year Treasury yield and a recent Fed rate hike, prompting many buyers to consider adjustable‑rate mortgages. Housing prices…
By Felo News Desk · Published
Mortgage rates climbed above 7% last week, marking the highest level for a 30‑year fixed‑rate mortgage since May 2024. According to data from the Mortgage Bankers Association (MBA), the average rate reached 7.12% in the week ending September 18, a jump that has added to the borrowing costs for homebuyers who are already navigating record‑high home prices.
What Happened to Rates?
The MBA’s weekly report shows that the 30‑year fixed‑rate mortgage rose to 7.12% last week, up from 6.95% the week before. This increase follows a sharp rise in the 10‑year Treasury yield, which has been climbing in response to concerns about inflation, government debt and higher borrowing costs. The Treasury yield reached around 5% in mid‑September, more than a percentage point higher than it was at the start of the year.
In a move that many lenders had already priced into mortgage rates, the Federal Reserve announced a 25‑basis‑point hike on September 12, raising the federal funds target range to 5.75%‑6.00%. The Fed’s decision was widely anticipated and was reflected in the upward pressure on the 10‑year Treasury yield and, in turn, on mortgage rates.
Why Buyers Are Turning to Adjustable‑Rate Mortgages
As fixed‑rate mortgages become more expensive, a growing number of buyers are opting for adjustable‑rate mortgages (ARMs). These loans offer a lower initial rate for a set period—often five years—before adjusting to market conditions. According to Mike Fratantoni, senior vice president and chief economist at the MBA, 5/1 ARMs were more than 1% lower than fixed‑rate mortgages during the same week.
Fratantoni noted that the lower initial rates of ARMs can be attractive to buyers who expect rates to remain stable or decline in the short term. However, the potential for future rate adjustments introduces uncertainty, especially for those who plan to stay in a home for many years.
Impact on the Housing Market
The housing market is already experiencing a slowdown as the summer season winds down. Higher mortgage rates can further dampen activity, as buyers face higher monthly payments and reduced affordability. Richard Shane, head of consumer and specialty finance research at J. P. Morgan, warned that elevated rates could stall origination growth, particularly if the rates remain high for an extended period.
Housing prices, meanwhile, remain near record highs, which compounds the affordability challenge. Even with lower initial rates on ARMs, the overall cost of borrowing is higher, making it more difficult for many prospective homeowners to qualify for a mortgage.
What’s Next?
Freddie Mac is scheduled to release its own data on the 30‑year fixed‑rate mortgage on Thursday. Analysts will be watching to see whether the trend of rising rates continues or if there is any sign of a slowdown. Meanwhile, lenders and buyers will be closely monitoring the Fed’s future policy moves, as any further rate hikes could push mortgage rates even higher.
In the meantime, buyers who are considering home purchases may want to explore adjustable‑rate options or look for properties in markets where prices are more manageable. Lenders, on the other hand, may adjust their underwriting standards to reflect the changing rate environment.
Key facts
- 30‑year fixed‑rate mortgage hit 7.12% last week, highest since May 2024
- Fed’s 25‑basis‑point hike lifted Treasury yields, pushing rates up
- Buyers are shifting to adjustable‑rate mortgages for lower initial rates
- Housing prices remain near record highs, tightening affordability
- Freddie Mac’s upcoming data will shed light on rate trends
- Elevated rates could slow housing market activity if sustained
Why it matters
Higher mortgage rates increase borrowing costs, directly affecting home affordability and the overall health of the housing market. Understanding these shifts helps buyers, sellers, and policymakers navigate the evolving economic landscape.
Frequently asked questions
What is an adjustable‑rate mortgage?
An adjustable‑rate mortgage (ARM) offers a fixed interest rate for an initial period—often five years—before adjusting based on market conditions.
How do mortgage rates relate to the Treasury yield?
Mortgage rates often track the 10‑year Treasury yield, which reflects investor expectations about inflation and economic growth.
Will the Fed raise rates again?
The Fed’s future actions depend on economic data, but any additional hikes could push mortgage rates higher.
What can buyers do to manage higher rates?
Buyers can consider ARMs, look for more affordable markets, or explore down‑payment assistance programs.
Sources
- [1] cbsnews.com — originally reported as “Mortgage rates top 7% for the first time in more than 2 years”
