Are mortgage rates heading back above 7%? Here's what experts think.

Mortgage rates have been steadily increasing this year, with experts predicting they may soon surpass the 7% mark. Mark Zandi, chief economist at Moody's Analytics, stated that they are effectively there and could go over. The average rate for a 30-year fixed-rate mortgage reached 6.71% this week, the highest in 13 months. Rates last hit 7% in January 2025.

The main reason for the rise in mortgage rates is turmoil in the bond market, driven by concerns over inflation due to rising energy prices and increasing U.S. government debt. This has caused a global bond sell-off, leading to higher borrowing costs for various types of loans, including mortgages. Mortgage rates follow the 10-year Treasury yield, which has risen from 4.08% to 4.77% over the past six months.

Inflation remains well above the Federal Reserve's 2% target, leading traders to believe the central bank will likely increase its benchmark rate later this month for the first time since July 2023. The next key data point will be the Labor Department's release of Consumer Price Index data for August. Experts warn that with bond investors on edge, rates could easily rise further, potentially pushing mortgage rates above 7%.

The housing market is expected to remain under pressure until rates come back down, which may take some time. Some borrowers may already be facing 7% mortgage rates, with half of the sample quotes from lenders already being above that threshold. Kate Wood, a lending expert at NerdWallet, notes that roughly half of the sample quotes she has seen are already north of the 7% mark.

Borrowers currently seeing 7% mortgage rates are likely to have been quoted such rates for some time. Jake Krimmel, a senior economist at Realtor.com, believes that mortgage costs are likely to remain elevated for a while, though he does not expect rates to reach the 7% mark. He believes that mortgage costs will continue to go up before they go down.

While higher mortgage rates can significantly increase the cost of buying a home, Wood suggests it could also present an opportunity as it might lead to lower competition due to reduced affordability.