Mortgage rates have been an awful tease over the past two weeks, staying within the upper 6 percent range without spilling into the sevens. However, the scales finally tipped over on Thursday, with the average 30-year fixed-rate mortgage clocking in at 7.03 percent.
Analysts expected rates to breach 7 percent before October, as the 10-Year Treasury yield increased 0.014 percent to 5.074 percent from Sept. 22 to Sept. 23. The yield is a useful mortgage indicator, as lenders add a spread — or percentage markup — on top of it. The spread reflects the effects of monetary and fiscal policies, economic growth, inflation, higher origination costs and the gap between mortgage-backed securities (MBS) and Treasury yields.
Lisa Sturtevant
“Freddie Mac reported that average mortgage rates have moved above 7 percent for the first time since January 2025,” Bright MLS Chief Economist Lisa Sturtevant told Inman in an emailed statement. “A mortgage rate increase from 6.5 percent to 7 percent adds more than $125 to the typical monthly payment on the median-priced home in the U.S.”
Inman reported ways for homebuyers to rate-proof their mortgage payments on Wednesday. The article, based on a Realtor.com analysis, said homebuyers looking to purchase within the next three months should be prepared for rates to shift 50 basis points in either direction from 6.95 percent.
A 0.5 percent rate increase would chop buyer budgets by $15,000 to $286,000, while a 0.5 percent rate decrease would boost what they can buy by $16,000 to $316,000. For homebuyers in this group, Realtor.com suggested building a budget buffer of at least $130 per month; however, that was based on a mortgage rate of 7 percent — which we’re now past.
Sturtevant said some homebuyers will compromise on location and square footage to stay within budget, but others will pause their plans until the headwinds subside. “Beyond the immediate financial constraints, the 7 percent threshold is a foreboding psychological barrier,” she said.
Mortgage rates are expected to keep climbing in the coming weeks, as the yield rose another 15 basis points — or 0.0015 percent — to 5.11 percent on Wednesday, representing a 19-year high.
Anthony Smith
Realtor.com Senior Economist Anthony Smith said the Federal Reserve will likely hike the federal funds rate during its October Federal Open Market Committee (FOMC) meeting. At its Sept. 16 meeting, the Fed increased the federal funds rate (the short-term rate) by 25 basis points to 4 percent at the top of the range.
The CME FedWatch eased the probability of a hike from 73.1 percent to 68.6 percent from Wednesday to Thursday, with the chance of a decrease still sitting at 0.00 percent.
“[The Fed’s] messaging since has leaned hawkish,” Smith said. “In remarks at the Chicago Fed’s housing affordability summit, Governor Michael S. Barr acknowledged his support for the unanimous decision to hike. He argued the Fed had been ‘out of position’ given changes in the economy and said his base case is that ‘further policy adjustments are likely to be needed to bring inflation back to target in a timely fashion.'”
“Barr also noted that roughly half of outstanding mortgages still carry a rate of 4 percent or below, which keeps existing owners locked in place,” he added. “Realtor.com research shows that lock-ins remain a dominant force within housing, and the current mortgage rate environment adds to these dynamics at play.”
Beyond yields, the federal funds rate and the consumer price index, Smith said Brent crude oil prices will also weigh on the housing market. The price per barrel has reached over $100, as the war in Iran trudges down an unpredictable path. A spring Inman report explained the connection between oil futures and prices at the pump, with gasoline prices tending to rise by about 2.4 cents for every $1 increase in the per-barrel cost of crude oil.
George Ratiu
The cost of crude oil reaches well beyond weekly gas stops, with National Apartment Association VP of Research George Ratiu telling Inman in March that it also reverberates through the cost of food and other goods.
Transportation companies will need to offset the increasing cost of diesel, which has risen to an average of $6.51 per gallon, per AAA. Crude oil is also key to manufacturing a never-ending list of everyday items, including something as simple as a plastic water bottle.
“Oil underpins so much of economic activity and commerce,” Ratiu said. “It’s the fuel that basically transports goods, both across the oceans, across roads, to the last mile, right to our homes, nowadays, especially with e-commerce. Everything we do anymore is heavily dependent on the cost of fuel.”
None of these metrics bode well for the fall, with Sturtevant and Smith both saying that sales could mirror the falling leaves.
“Crossing this mark could create a chilling effect on the market, leading home sales transactions to slow considerably this fall,” Sturtevant said.
Sellers will control quite a bit of the temperature in the coming months by either deciding to make larger price cuts, thus keeping buyers engaged in the market, or pulling their listings until the spring.
“For buyers and sellers, the highest mortgage rates in more than a year and a half are landing on a market that is in the midst of a slowdown,” Smith said. “Existing home sales hit their 2026 low in August, and pending sales have turned negative year over year.”
“A 7 percent handle is as much psychological as mathematical, and it arrives at the point in the season when leverage usually shifts toward buyers,” he added. “… Either way, this will continue to add to the headwinds in place for home sales.”
