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Mortgage Rates in the US Surge to 7.31%, Reaching a 23-Year High

Mortgage rates in the United States have reached their highest point in nearly 23 years this week due to ongoing inflation pressures.

In the week ending September 28, the 30-year fixed-rate mortgage averaged 7.31%, a slight increase from the previous week’s 7.19%, according to data from Freddie Mac released on Thursday. A year ago, the 30-year fixed-rate stood at 6.70%.

Freddie Mac’s chief economist, Sam Khater, noted that this marks the highest level for the 30-year fixed-rate mortgage since the year 2000. However, unlike the situation at the turn of the millennium, today’s rising house prices are occurring simultaneously with increasing mortgage rates, largely due to limited housing inventory. These challenges are leading both buyers and sellers to wait for more favorable conditions.

The average mortgage rate is determined based on mortgage applications received by Freddie Mac from numerous lenders nationwide. This survey specifically focuses on borrowers who make a 20% down payment and have excellent credit scores.

Mortgage rates have experienced a significant increase due to the Federal Reserve’s efforts to combat historic inflation. While progress has been made since June 2022 when inflation reached 9.1%, Federal Reserve officials indicate that there is still more work to be done.

The Federal Reserve’s preferred gauge of inflation, the core Personal Consumption Expenditures index, presently stands at 4.2%, which is more than double the Fed’s 2% target. Economists anticipate a decrease to 3.9% in the upcoming reading scheduled for release this Friday.

Mortgage Rates Rise as Fed Signals Higher Interest Rates Ahead

This week saw a surge in mortgage rates, building on the modest increase observed last week. Investors are bracing themselves for a prolonged period of higher interest rates following the recent Federal Reserve policy meeting, according to Danielle Hale, Chief Economist at

Hale emphasized that the key takeaway from the meeting was that the Fed’s efforts to raise interest rates are far from over. She pointed to revised economic projections, indicating that another rate hike is likely later this year. Additionally, the projected policy rates for 2024 and 2025 are higher than previously anticipated, signaling a continuing shift in monetary policy. Market participants are still adjusting to these developments.

While the Federal Reserve doesn’t directly determine the interest rates borrowers pay for mortgages, its actions exert a significant influence. Mortgage rates typically move in sync with the yields on 10-year US Treasuries, which are influenced by a combination of factors, including expectations about the Fed’s actions, actual Fed decisions, and investor sentiment. As Treasury yields increase, so do mortgage rates, and conversely, when Treasury yields decline, mortgage rates tend to follow suit.

Notably, the yield on 10-year Treasuries climbed from 4.3% on September 20 to 4.6% as of September 27, indicating a notable shift in market dynamics.

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