Key facts
- US mortgage rates surpassed 7% for the first time since January 2025.
- The Federal Reserve hiked interest rates by a quarter-point, citing high inflation.
- The 10-year US Treasury yield reached its highest level since July 2007.
- The 30-year US Treasury yield hit its peak since 2004.
- Existing home sales hit their 2026 low in August.
- Anthony Smith of Realtor.com noted that a 7% mortgage rate is psychological as well as mathematical.
US mortgage rates have climbed above 7% for the first time in 20 months, a development that is expected to further dampen the housing market. The milestone was reached as the Federal Reserve continues its campaign to combat inflation with interest rate hikes.
According to federal lender Freddie Mac, rates on 16 September increased by a quarter-point to a range of 3.75% to 4%. This move follows a series of rate hikes by the Fed, which directly influence mortgage costs. The central bank's rate-setting committee anticipates at least one more hike before the end of the year.
The 10-year US Treasury yield, a key benchmark for mortgage rates, also reached its highest level since July 2007 on Thursday, while the 30-year Treasury yield hit its peak since 2004. These increases reflect growing investor expectations for another Fed rate hike next month.
Last year, the 30-year mortgage rate had been trending down from a high of 7.79% in late 2023. However, rates have been steadily increasing since late February, a period marked by the US and Israel's war with Iran, which contributed to a surge in inflation and energy prices. Brent crude oil topped $105 per barrel earlier on Thursday.
Anthony Smith, a senior economist at Realtor.com, noted that the 7% mortgage rate is both a psychological and mathematical barrier. He added that existing home sales hit their lowest point of 2026 in August, with pending sales also showing a year-over-year decline.
High mortgage rates, coupled with wages that have not kept pace with inflation and rising everyday costs, are contributing to a struggle for homeownership in the US. This economic frustration is anticipated to play a role in the upcoming November midterm elections, with a recent CNN poll indicating that nearly three-quarters of Americans disapprove of Trump's handling of the economy.