The average 30-year fixed mortgage rate climbed to 6.95% this week, Freddie Mac reported Thursday, its highest level in 20 months and a fresh blow to homebuyers who briefly saw rates dip below 6% earlier this year.
The rate rose from 6.76% last week, according to Freddie Mac — a 19-basis-point jump, the fourth consecutive weekly increase and the largest one-week rise in 16 months. The last time borrowing costs were this high was the week of January 30, 2025, putting the 7% threshold back within sight.
The latest increase has quickly filtered through to demand. Mortgage applications to purchase a home fell 19% last week compared with a year ago, while refinancing applications plunged 65% from last year, according to data from the Mortgage Bankers Association, as reported by CNN.
The housing market is showing little momentum beyond the rate pressure. Pending home sales rose 0.3% in August from July, according to the National Association of Realtors, but were down 4.7% from a year earlier. “The housing market is still sluggish,” said Lawrence Yun, the association’s chief economist.
The outlook is grim for the remainder of the year. “Certainly slow home purchases and mortgage refinancing through the rest of the year,” said Eric Orenstein, a senior director at Fitch Ratings, according to CNN.
The rise in borrowing costs is tied to turmoil in bond markets. According to CNN, the Iran war, climbing oil prices, and renewed inflation fears have pushed up Treasury yields, which mortgage rates closely track. The yield on the 10-year Treasury note approached 4.8% this month, near its highest level since October 2023, Reuters reported on September 9.
The reversal caps a turbulent year for borrowers. Rates briefly fell below 6% in February for the first time in three years, sparking a short-lived window of optimism among buyers, before climbing steadily back toward their current levels.
The refinance market has all but frozen. A 65% year-over-year collapse in refinancing applications, per the Mortgage Bankers Association, signals that few homeowners have any incentive to trade the cheaper rates they locked in during prior years for today’s levels — a dynamic that also keeps existing homes off the market and limits choices for buyers.
For those still shopping, each step higher compounds the affordability strain. At rates near 7%, monthly payments on a typical purchase climb meaningfully versus the sub-6% window buyers glimpsed in February, even as home prices remain elevated in much of the country.
With mortgage costs now near 7%, would-be buyers face a familiar affordability squeeze: higher monthly payments on homes whose prices remain elevated, and little incentive for existing homeowners to give up the lower rates locked in during prior years.
Sources: CNN, Reuters, Freddie Mac, Mortgage Bankers Association.
