US mortgage rates top 7% for first time since January 2025

The average US 30-year fixed mortgage rate climbed to 7.03% this week, crossing 7% for the first time since January 2025 and adding to the cost of buying a home in an already sluggish market.

Freddie Mac reported the rate Thursday. A separate Mortgage Bankers Association survey put the 30-year fixed rate at 7.12% for the week ending Sept. 18. Both readings follow a sharp rise in borrowing costs since late February, when rates briefly fell. NPR reported that the Freddie Mac rate dipped below 6% then, while CBS News said it fell below 5%.

Mortgage rates tend to track the yield on the 10-year US Treasury note. That yield reached 5.1% Thursday, its highest level in about two decades, CBS News reported. The Guardian said it was the highest since July 2007, while the 30-year Treasury yield reached its highest point since 2004. Investors have pushed yields higher amid concerns about inflation, federal debt and the economic effects of the war with Iran.

The Federal Reserve raised its benchmark interest rate by a quarter percentage point on Sept. 16, to a range of 3.75% to 4%, its first increase this year. A majority of its rate-setting committee projected at least one more increase before year’s end, according to The Guardian. CBS News reported that traders saw a 66% chance of a rate increase at the Fed’s October meeting.

“Higher inflation, the prospect of tighter monetary policy, potentially stronger economic growth and ballooning federal debt have pushed up mortgage rates,” Joel Kan, an economist at the Mortgage Bankers Association, told CBS News.

The war with Iran has contributed to volatility in bond markets and higher energy prices. Brent crude oil topped $105 Thursday, The Guardian reported. CBS News said annual inflation reached 3.4% in August, one percentage point higher than when the war began.

The higher rates are bearing down on home sales. Existing home sales fell 2% in August from the previous month, according to the National Association of Realtors. The median existing home sold for about $429,000; at that price, a one-percentage-point increase in a mortgage rate can add hundreds of dollars to a buyer’s monthly payment and tens of thousands of dollars over a loan’s life, NPR reported.

“A 7% handle is as much psychological as mathematical,” Anthony Smith, a senior economist at Realtor.com, told The Guardian. He said the threshold arrives when buyers typically gain negotiating leverage. CBS News reported that more than one in five homes on the market had a price cut in August.

The outlook for rates remains uncertain. Realtor.com economist Jake Krimmel told CBS News rates were “far more likely to go up than down” over the next month or two or by year’s end. Zillow, by contrast, forecast rates of 6.7% at the end of this year and 6.3% at the end of 2027. Lawrence Yun, chief economist for the National Association of Realtors, told CBS News that the direction of rates would depend in part on how the Iran war affects inflation and oil supplies.