Freddie Mac says the average 30-year fixed mortgage rose to 7.03% this week, up from 6.95% a week earlier.
Other measures show borrowers facing even higher rates, with Mortgage News Daily putting its daily 30-year rate at 7.45% on Thursday.
Higher Treasury yields, persistent inflation, rising energy prices and expectations for additional Federal Reserve rate increases are pushing mortgage costs higher.
The fall home-buying season is getting more expensive as mortgage rates continue to climb, with several measures showing borrowing costs at or above 7% this week.
Freddie Mac reports that its benchmark 30-year fixed-rate mortgage averaged 7.03% for the week ending Sept. 24, up from 6.95% the previous week. The 15-year fixed mortgage rose even more sharply, climbing to 6.42% from 6.26%. A year ago, the 30-year rate averaged 6.30%.
But Freddie Mac's weekly survey may understate how quickly rates moved late in the week. Mortgage News Daily, which tracks rates on a daily basis, put the average 30-year fixed mortgage at 7.45% Thursday, up from 7.26% a day earlier. Its 15-year rate reached 7.10%.
Bankrate's survey provides another measure. It reported an average 30-year fixed rate of 7.17% on Sept. 24, 10 basis points higher than a week earlier. Its average 15-year fixed mortgage was 6.54%, up 15 basis points.
The differences among the surveys reflect their different methodologies and timing. Freddie Mac's number is a weekly average based on thousands of mortgage applications submitted through its Loan Product Advisor system, while daily surveys can respond more quickly to sudden movements in financial markets.
Why mortgage rates are rising
Mortgage rates aren't set directly by the Federal Reserve. Instead, they tend to move with longer-term bond yields, particularly the 10-year Treasury yield, because mortgage-backed securities compete with Treasury securities for investors.
And Treasury yields have moved sharply higher.
Federal Reserve data show the 10-year Treasury yield reaching 5.11% on Sept. 24, putting additional upward pressure on mortgage rates.
Mortgage News Daily attributed the latest surge to a combination of stronger economic data, higher oil prices, Federal Reserve comments and concerns that upcoming economic reports could result in a more aggressive path for interest rates.
Those concerns gained momentum after the Fed raised its benchmark federal funds rate by a quarter percentage point on Sept. 16, setting a target range of 3.75% to 4%. The central bank said economic activity was expanding at a "solid pace," domestic spending remained resilient and inflation remained elevated.
The Fed's latest economic projections also pointed toward interest rates remaining elevated. Policymakers' projections showed a median federal funds rate of 4.1% at the end of 2026, higher than the 3.8% median projected in June.
Inflation isn't cooperating
Inflation is another reason bond investors are demanding higher yields.
The Consumer Price Index rose 0.4% in August and was 3.4% higher than a year earlier, according to the Bureau of Labor Statistics. Gasoline prices jumped 3.9% during the month, accounting for more than one-third of the monthly increase in the overall CPI. Energy prices increased 2.1%.
Higher oil and gasoline prices are especially important because sustained increases in energy costs can filter through the economy, increasing transportation, manufacturing and distribution expenses. Investors may demand higher yields on long-term bonds if they believe inflation will remain elevated.
Strong economic growth can have a similar effect. An economy that continues to expand rapidly gives the Fed less reason to reduce interest rates and can increase concerns that demand will keep inflation above the central bank's 2% target.
What it means for homebuyers
The move from the mid-6% range to above 7% can make a noticeable difference in affordability.
For example, principal and interest on a $400,000 30-year mortgage would be about $2,661 a month at 7%. At 7.5%, the payment rises to roughly $2,797 — about $136 more each month, or more than $1,600 a year. Those figures don't include property taxes, homeowners insurance or other housing costs.
The recent increase is particularly significant because rates have risen quickly. Freddie Mac's 30-year average was 6.76% on Sept. 10, rose to 6.95% on Sept. 17 and reached 7.03% this week.
For buyers, that makes shopping among lenders increasingly important. Mortgage rates and fees can vary considerably from one lender to another, and borrowers should compare the annual percentage rate, or APR, along with the advertised interest rate.
Buyers also shouldn't assume that the Federal Reserve's next move will automatically determine mortgage rates. Long-term rates can move ahead of the Fed as investors change their expectations about inflation and economic growth.