The average rate on a 30-year fixed mortgage crossed 7% this week for the first time since January 2025, Freddie Mac data shows, adding another layer of strain to a housing market already frozen by two years of elevated borrowing costs.
Fed moves and market reaction
The Federal Reserve raised its policy rate by a quarter point on 16 September, the first increase since 2023, moving the target range to 3.75%-4%. A majority of the rate-setting committee projected at least one more hike before year-end. The 10-year Treasury yield climbed to its highest level since July 2007, while the 30-year yield reached a peak last seen in 2004, as traders priced in another move next month. Treasury Secretary Scott Bessent had announced a tripling of government debt buybacks earlier in September, yet yields kept rising.
The path to this point
Rates had been declining from a generational high of 7.79% in late 2023 through much of last year. The reversal began in late February, when the United States and Israel launched military operations against Iran. The conflict pushed inflation to a three-year high and drove Brent crude above $105 a barrel on Thursday, feeding directly into higher borrowing costs.
Housing market signals
Existing home sales hit their 2026 low in August, and pending sales turned negative on a year-over-year basis, according to Realtor.com senior economist Anthony Smith. He described the 7% threshold as psychological as much as mathematical, noting it arrives at the seasonal point when negotiating leverage typically shifts toward buyers.
Broader pressure on households
Wage growth has not kept pace with inflation, and everyday costs remain elevated. The frustration is expected to surface in November's midterm elections, where Republicans are fighting to hold Congress. A CNN poll conducted by SSRS found nearly three-quarters of Americans disapprove of President Trump's economic stewardship, and two-thirds of registered voters call the economy extremely important to their vote.