Mortgage Rates Surpass 7% as Experts Warn of Further Increases

Mortgage rates have climbed above 7%, marking their highest point in nearly two years and intensifying affordability challenges for home buyers. With borrowing costs projected to rise further in the coming weeks, experts suggest that relief is unlikely before the end of the year.

Freddie Mac data released Thursday indicates that the average rate on a conventional 30-year mortgage reached 7.03%, surpassing the peak seen in January 2025. This represents an increase of more than one percentage point since late February, when rates briefly dipped below 6%. According to the Mortgage Bankers Association (MBA), the 30-year loan rate stands even higher at 7.12%.

For a borrower seeking a $400,000 loan, the recent rate hike translates to an additional monthly cost of approximately $276. Joel Kan, vice president and deputy chief economist at the MBA, attributed the surge to a combination of higher inflation, the prospect of tighter monetary policy, stronger economic growth, and a growing federal debt.

Mortgage rates generally follow the yield on the 10-year Treasury note, which has spiked recently due to rising energy costs and inflation linked to the war in Iran. Kara Ng, senior economist at Zillow Home Loans, noted that the 10-year Treasury yield hit 5.1% Thursday, its highest level in roughly two decades. “That kind of bond market move introduces real upside risk to mortgage rates,” Ng said.

Jake Krimmel, senior economist at Realtor.com, stated that rates are “far more likely to go up than down” over the next few months. Traders currently assign a 66% probability to a Federal Reserve rate hike at its October meeting, according to CME Group data. Lawrences Yun, chief economist at the National Association of Realtors, added that while an end to the war could cause both oil prices and mortgage rates to fall, continued disruption to oil flows could push rates even higher.

Despite the upward trend, some forecasts offer modest optimism. Zillow predicts rates could drop to 6.7% by the end of this year and 6.3% by the close of 2027. However, Yun cautioned that long-term budget deficits and economic growth fueled by AI and data center investments may prevent rates from falling significantly, regardless of inflationary pressures from the conflict.

Home buyers may still find some advantage as seasonal activity slows after the summer peak. Krimmel noted that reduced competition can provide greater negotiating power and a wider selection of homes. In August, more than one in five homes experienced a price reduction, suggesting that potential savings from lower home prices could outweigh the impact of higher interest rates.