US Mortgage Rates Increase to an Almost Three-Year High of 7.3%

(Bloomberg) -- US mortgage rates climbed for a sixth straight week to an almost three-year high, thwarting would-be homebuyers.

The contract rate on a 30-year fixed mortgage rose 18 basis points in the week ended Sept. 25 to 7.30%, the highest since November 2023, according to Mortgage Bankers Association figures released Wednesday. The rate on a five-year adjustable mortgage surged 37 basis points to 6.47% — the highest in more than two years.

Higher home-financing costs are spelling more difficulty for an already troubled housing market. The MBA purchase index, which measures loan applications, fell 4.3% to the lowest level since April 2025. The group's refinance gauge tumbled another 8.7%, extending a skid dating back to mid-August.

Mortgage rates closely track 10-year Treasury note yields, which have been climbing as conflict in the Middle East and Russia-Ukraine war keep energy costs and overall inflation elevated. On Tuesday, the 10-year yield hit the highest level in more than 19 years.

Concerns about government debt and recent data showing solid economic activity are also contributing to the rise in borrowing costs. The Federal Reserve raised its benchmark rate earlier this month for the first time since 2023 in an effort to tame inflation. Investors expect US central bankers will hike again by the end of the year.

Mortgage rates above 7% will keep more people tethered to their current homes because the gap between homeowners' existing 3% or 4% mortgages and today's higher rates is getting wider, said Mark Fleming, chief economist at title insurer First American Financial Corp.

While sales could slow further, a large price drop is unlikely, provided there isn't a major economic downturn that causes forced sales like foreclosures, he said.

Prices are "downside sticky," Fleming said. "They generally slow down or stop going up."

Sales of previously owned homes, which make up the bulk of the US housing market, have struggled to gain any traction. Contract closings fell in August to their weakest pace in more than a year.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.