Mortgage rates top 7% for the first time since May 2024

Mortgage rates surged past the 7% threshold for the first time in over two years, hitting a peak of 7.12% for a 30-year fixed-rate mortgage in the week ending September 18, according to the Mortgage Bankers Association. This marked the highest level since May 2024. The rising rates place additional pressure on borrowers at a time when housing prices remain near record highs.

More buyers are turning to riskier adjustable-rate mortgages, which offer lower initial rates, as fixed rates continue to climb, noted Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association. Freddie Mac is set to release its own data on the 30-year fixed-rate mortgage on Thursday, with rates currently at 6.95%.

The 30-year fixed-rate mortgage typically tracks the 10-year Treasury yield, which has risen recently due to concerns over inflation, government debt, and higher borrowing costs. The Federal Reserve raised interest rates by a quarter of a percentage point last week, a move that some lenders incorporated into their rates. The 10-year Treasury yield has climbed above 5% since tensions escalated in Iran in late February.

While the housing market typically cools down in the summer months, higher rates could further dampen activity as buyers grapple with increased borrowing costs. Although there are still plenty of prospective homebuyers in the pipeline, affordability issues and the volatility of rates could impede growth in mortgage origination, particularly if rates remain elevated for an extended period, said Richard Shane, head of consumer and specialty finance research at J.P. Morgan.