Borrowing to buy a home in America just got more expensive. Mortgage finance agency Freddie Mac said on October 8 that the average rate on a 30-year fixed mortgage averaged 7.40% this week, up from 7.28% last week — the highest since November 2023. The Mortgage Bankers Association (MBA) put the rate even higher: 7.49% for the week ended October 2, likewise a near three-year peak.
Rates have now risen for seven straight weeks, climbing roughly 0.75 percentage point in that stretch. Per Barron's math, on a $400,000 home loan that run-up adds about $200 a month in principal and interest payments.
Mortgage rates track the 10-year Treasury yield, which averaged 5.28% this week — near a 24-year high. Behind the move: inflationary pressure from rising energy prices, ballooning government deficits, outsized AI capital spending, and bond investors' conviction that the Federal Reserve will keep short-term rates higher for longer.
On the record, Fed Governor Christopher Waller said on October 8 that more rate hikes are needed to bring inflation down — it ran 3.4% in August against the 2% target — though "the hikes do not need to come at consecutive meetings." The Fed already raised rates in September, and policymakers have signaled another increase could come before year-end.
The higher rates are freezing the market. Mortgage applications fell 4.2% last week, refinancing applications dropped sharply, and overall application volumes are the lowest since February 2025 — down nearly 50% since January. "Very few homeowners have an incentive to refinance at these rates, and the jump in borrowing costs has caused many potential borrowers to step back from the purchase market," MBA deputy chief economist Joel Kan told Reuters.
The Wall Street Journal flags an ironic twist: with borrowing costs stopping buyers in their tracks, sellers are starting to blink — price cuts, closing-cost credits, and rate buydowns are spreading. A broker at ATX Mortgage Lending in Austin said 75% to 80% of his deals involve sellers offering credits to cover rate buydowns. TD Cowen researchers expect rates to ease to 6.8% by year-end and 6.6% by the end of 2027, but caution that "we would not expect the move lower in rates to be the reason for increased strength in the housing market."
The timing is politically charged: the November 3 midterm elections are four weeks away, a Reuters/Ipsos poll shows the cost of living is the top issue deciding votes, and President Trump's approval rating has sunk to a record low of 32%. Where mortgage rates go next hinges on inflation data, Treasury yields, and whether the Fed follows through with another hike by year-end.