Key facts
- The average 30-year fixed-rate mortgage reached 7.4% on Oct. 8, 2026.
- This is the highest mortgage rate since November 2023.
- Home prices increased 2.6% year-over-year in July.
- Existing home sales decreased 1.2% in August.
- Zillow projects a 3.5% year-over-year decline in home sales for the fourth quarter.
- An estimated 2.5 million to three million people have been priced out of the market.
Mortgage rates have surged to their highest level in three years, reaching 7.4% for a 30-year fixed-rate mortgage on October 8, 2026, according to Freddie Mac. This increase, up from 7.28% the previous week and significantly higher than the 6.3% recorded a year prior, is further pressuring Americans struggling with housing affordability.
Home prices, which had already climbed significantly during the pandemic, continued to rise, increasing 2.6% nationwide in July from the year before, as per the Federal Housing Finance Agency. This combination of soaring rates and high prices has led to a slowdown in the housing market. Sales of existing homes fell 1.2% in August compared to the previous year, according to the National Association of Realtors.
Economists at Zillow project a 3.5% year-over-year decline in home sales for the fourth quarter. Nancy Vanden Houten, lead US economist at Oxford Economics, estimates that between 2.5 million and three million people have been priced out of the market. Investors are also concerned about potential inflation driven by higher energy prices and debt accumulation by tech companies investing in AI infrastructure.
The yield on the 10-year Treasury note, a benchmark for many loans including mortgages, rose to 5.36% on Thursday, its highest level since 2002. This environment is particularly challenging for first-time buyers. Potential sellers, wary of facing higher mortgage rates themselves when they seek to buy a new home, are also pulling back, leading to a 3.9% decrease in new home listings in September.