Mortgage rates hit 7.40%, a three-year high
Key takeaways
- The average 30-year mortgage rate hit 7.40%, the highest since November 2023.
- Rates have now risen for seven straight weeks, up from 6.30% a year ago.
- Refinance applications have fallen to their lowest level since January 2025.
Buying a home just got more costly. The average rate on a 30-year fixed mortgage hit 7.40%. That is the highest level in nearly three years.
Freddie Mac shared the number on October 8. It covers the week ending October 8. The rate has now risen seven weeks in a row. A year ago, the same loan averaged 6.30%.
This article is for information only and is not financial advice.
What happened
Freddie Mac runs a weekly survey of mortgage rates. Its latest survey shows a steady climb. The 30-year fixed rate rose to 7.40% from 7.28% the prior week.
That is a jump of 12 basis points. A basis point is one hundredth of a percent.
The last time the rate was this high was November 16, 2023. Back then, it hit 7.44%. The current run is the longest stretch of weekly increases in several years.
Shorter loans are also more costly. The average 15-year fixed mortgage rose to 6.73%. That is up from 6.60% a week before.
A year ago, it averaged 5.53%.
The rise tracks the bond market. Mortgage rates tend to follow the 10-year Treasury yield. That yield hit 5.29% on Thursday.
It stood at 3.97% before the US-Iran war began in late February.
Surging energy prices tied to the conflict have fed inflation fears. Those fears have pushed bond prices down and yields up. Lenders use the 10-year yield as a guide to price home loans.
When the yield rises, mortgage rates follow.
The Federal Reserve is also in focus. Fed Governor Christopher Waller said more rate hikes are needed. He spoke at a Central Bank of Turkey forum in Istanbul on Thursday.
He said inflation must come back toward the Fed's 2% target. It has run above that target for more than five years.
Waller added that the hikes do not need to come at back-to-back meetings. Traders still expect the Fed to hold rates at its 3.75% to 4% range at the October meeting. CME FedWatch puts the chance of a hold at about 78%.
A December hike looks more likely as the next move.
Why it matters
A higher rate means a higher monthly bill. For a borrower financing a $400,000 loan, the rate rise since late February alone adds about $376 to monthly payments. That is according to Mortgage Professional America.
That extra cost hits family budgets hard. It shrinks what buyers can afford. A buyer who could afford a $400,000 home at 6.30% may now need to look at a cheaper home.
Or they may wait.
The numbers show that many people are waiting. Mortgage applications have fallen for five straight weeks, according to the Mortgage Bankers Association. Refinance applications dropped to their lowest point since January 2025. They are now less than half their level from a year earlier.
Joel Kan is the deputy chief economist at the Mortgage Bankers Association. He says higher rates are dampening both refinance and purchase activity. First-time buyers and FHA borrowers feel the pressure most.
Home sales are also slow. Sales of previously owned homes fell 2% in August from July. They hit a seasonally adjusted annual rate of 3.98 million.
That is the slowest pace in more than a year, according to the National Association of Realtors.
Supply is a mixed picture. Active listings rose 6.7% from a year ago. That is the fastest pace since February.
But new listings fell 4.1% from a year ago as sellers pulled back. National prices slipped 1.4% from last year. That is a thin buffer for buyers who can still afford to act.
The rate rise also links to the wider market. The same bond and inflation fears are moving stocks. Bank earnings and chip stocks set the tone on Wall Street this week, as our TSX market explainer covers.
Big banks are reporting earnings now, and JPMorgan's results show the strain, as our JPMorgan earnings explainer explains.
What happens next
Freddie Mac chief economist Sam Khater has one tip for borrowers. He says shopping around can save thousands over the life of a loan. Get quotes from more than one lender.
Compare fees as well as rates.
Buyers have a few options. Some can wait for rates to fall. Some can look at cheaper homes.
Some can ask sellers to help with closing costs. Others can look at adjustable-rate loans. Those loans start with lower rates but can rise later.
Each choice has risks. Talk to a lender or adviser before you decide.
Refinancers face a tough call. Most people who locked in low rates in 2020 and 2021 have no reason to refinance at 7.40%. A refinance only makes sense if your current rate is higher than today's rate.
Or if you need cash from your home equity. Even then, the math must work.
Watch the Fed and the bond market. If inflation cools, the 10-year yield may fall. Mortgage rates would likely follow.
If inflation stays hot, more hikes could push rates higher. The next big clues come from US inflation data this week.
The housing market is stuck between high prices and high rates. More listings give buyers more choice. But the monthly bill is the hurdle.
Until rates ease, many buyers will keep waiting.
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