NEW YORK, NY — Mortgage rates are moving higher again, and economists say the climb may not be over. The average rate on a 30-year fixed mortgage rose this week to 6.71%, according to Freddie Mac, reaching its highest level in 13 months.
That is up from below 6% in late February, a jump that has changed the math for buyers trying to stretch a budget in a still-expensive housing market. Some analysts now think rates could move back above 7%, a level last seen in January 2025.
Bond market stress is driving borrowing costs higher
Economists point to turmoil in the bond market as the main force behind the latest rise in mortgage rates. Inflation worries, fueled in part by rising energy prices and growing U.S. government debt, have prompted a global sell-off in bonds and pushed borrowing costs upward across the economy.
That matters because mortgages usually follow the same broad direction as the 10-year Treasury yield. Over the past six months, that benchmark has climbed from 4.08% to 4.77%, increasing pressure on mortgage lenders to offer higher rates.
When investors demand more return for holding long-duration bonds, home loans tend to get more expensive too. The result is higher monthly payments for borrowers even when home prices do not change.
Economists say 7% could return if yields keep rising
Mark Zandi, chief economist at Moody’s Analytics, said the market is already close to that threshold. “We’re effectively there,” he told CBS News, adding that rates could easily go over 7% if bond yields keep climbing.
Zandi said the bond market is in a fragile stretch and that investor nerves could push mortgage rates higher still. He warned that the housing market may stay stuck until borrowing costs fall again, a process he said could take a while.
His view reflects a broader concern that rates may remain elevated longer than many buyers hoped. Even a small move above 7% would further squeeze affordability for households already dealing with high home prices.
Inflation and Fed expectations are adding to the pressure
Inflation is still running well above the Federal Reserve’s 2% annual target, and that is shaping expectations for interest rates more broadly. Traders now think the central bank is likely to raise its benchmark rate later this month for the first time since July 2023, according to CME FedWatch.
A key test comes next week when the Labor Department releases August Consumer Price Index data. If inflation comes in hotter than expected, markets could read that as another reason for rates to stay high or move higher.
That combination of inflation uncertainty and bond-market anxiety is part of why lenders have been repricing loans higher. It also helps explain why consumers are seeing more expensive borrowing costs not just in mortgages, but in auto loans and credit cards too.
Some borrowers are already being quoted rates above 7%
Kate Wood, a lending expert at NerdWallet, said many borrowers may already be bumping into 7% offers when they shop around. She said roughly half of the lender quotes she has seen are already above that mark.
Wood added that people looking for a mortgage have probably been seeing “sevens for a little while now” in the quotes they receive. That does not mean every borrower will get the same rate, but it suggests the average has already begun to catch up with market conditions.
For home shoppers, that gap between headline averages and real-world quotes can matter. A borrower comparing offers may find that the rate on a specific loan is higher than the national average suggests.
Higher rates may cool competition, but they also strain budgets
Jake Krimmel, senior economist at Realtor.com, said mortgage costs are likely to stay elevated for some time. He said he does not know whether rates will actually reach 7%, but expects they are more likely to rise sooner than they are to fall.
That outlook leaves prospective buyers in a difficult spot. Higher mortgage rates make homes more expensive to finance, which can push some shoppers to delay buying or reduce their price range.
At the same time, Wood said the slowdown can help buyers in another way. With fewer people competing, home prices may ease somewhat, giving shoppers more room to negotiate even if the rate itself is less favorable.
She said falling rates would likely bring more buyers back into the market, which could tighten competition again. For now, the balance between lower competition and higher financing costs remains one of the defining tensions in housing.
More on what homes, rents and new builds are doing near you, on RHS Commoner.
