U.S. mortgage rates climbed to their highest level in more than a year this week, adding another affordability hurdle for homebuyers as elevated Treasury yields, inflation concerns and uncertainty over the Federal Reserve continue to weigh on the housing market.
The average rate on a 30-year fixed mortgage rose to 6.71% for the week ended September 3, up from 6.66% a week earlier, according to Freddie Mac. That is the highest average since July 31, 2025, when the rate stood at 6.72%, and above the 6.50% borrowers faced at the same point last year.
The average 15-year fixed mortgage also moved higher, reaching 6.04% from 5.98% the previous week. A year earlier, the 15-year rate averaged 5.60%.
The weekly increase may appear small, but mortgage costs have moved substantially from their earlier-2026 lows. Freddie Mac’s 30-year average fell as low as 5.98% in late February before climbing more than 70 basis points to its current level.
For a buyer financing $400,000 over 30 years, a 6.71% rate translates to roughly $2,584 a month in principal and interest, compared with about $2,393 at 5.98%, according to a MarketCommand calculation. That is a difference of roughly $191 each month, before property taxes, insurance and other housing costs are included.
For households already dealing with high home prices, that additional financing cost can determine whether a property remains affordable.
Why Mortgage Rates Are Rising
The Federal Reserve does not directly set mortgage rates. Instead, long-term home-loan rates tend to move with bond-market conditions, particularly the yield on the 10-year U.S. Treasury.
That yield stood near 4.74% around midday Thursday, up from 4.67% a week earlier. Before the U.S.-Iran conflict began in late February, the 10-year yield was around 3.97%. Renewed fighting and higher crude-oil prices have contributed to concerns that inflation could remain elevated, while growing federal debt has added another source of pressure on longer-term borrowing costs.
Those forces have pushed mortgage rates back toward 7% even though the Federal Reserve has not raised its benchmark rate this year.
The Fed’s next move remains uncertain.
Chair Kevin Warsh said at the Jackson Hole economic symposium last week that inflation had not improved sufficiently and suggested policymakers could have additional work to do. The Federal Open Market Committee meets September 15-16.
Fed Governor Christopher Waller offered a more conditional view Thursday. Waller said he would be inclined to keep the federal funds rate unchanged if upcoming data confirm that inflation is continuing to cool. If August data instead show that recent progress was temporary, he said another rate increase could be appropriate.
The Fed’s preferred inflation measure is still running well above target. Headline PCE inflation was 3.7% over the 12 months through July, while core PCE inflation stood at 3.3%. Waller noted, however, that three-month core inflation has fallen from 4.76% in February to about 3.05%, suggesting some recent improvement underneath the year-over-year figures.
For mortgage borrowers, the distinction matters. A Fed pause does not automatically send mortgage rates lower, but softer inflation could pull Treasury yields down and eventually provide relief for home financing. A renewed inflation surge could have the opposite effect.
Housing Demand Is Already Under Pressure
The rate increase comes as the U.S. housing market continues to struggle with a combination of expensive financing and elevated property prices.
Existing-home sales fell 1.7% in July to a seasonally adjusted annual rate of 4.06 million, according to the National Association of Realtors. Sales remained 0.7% above the same month last year, but activity continues to run at historically subdued levels following the housing slowdown that began as mortgage rates surged from pandemic-era lows.
The median existing-home price reached $434,100 in July, 2% higher than a year earlier. Inventory stood at 1.54 million homes, representing a 4.6-month supply at the current sales pace.
New construction has not escaped the slowdown.
Sales of newly built single-family homes dropped 10.5% in July from June to an annualized rate of 607,000 and were 6.3% below their year-earlier level, according to the Census Bureau and Department of Housing and Urban Development.
The number of new homes available for sale increased to 488,000, equivalent to 9.6 months of supply at July’s sales pace. The median new-home price was $393,800, down slightly from both June and July 2025.
Higher inventories can eventually give buyers more negotiating leverage, but elevated financing costs continue to limit how much home many households can afford.
Mortgage Applications Show Buyers Haven’t Completely Disappeared
The latest mortgage-application data show a market that is weak rather than frozen.
Total mortgage applications increased 0.8% during the week ended August 28, according to the Mortgage Bankers Association. Applications for home purchases rose 2% on a seasonally adjusted basis, although the unadjusted purchase index remained roughly flat compared with a year earlier.
Refinancing activity declined 1% for the week and was 19% lower than a year ago.
The weakness in refinancing is particularly understandable with mortgage rates near their highest level in 13 months. Millions of existing homeowners still hold mortgages originated when rates were substantially lower, reducing the financial incentive to refinance and contributing to the housing market’s so-called lock-in effect.
Homeowners with low-rate mortgages may also be reluctant to sell and replace those loans with new financing above 6.5%, which can constrain existing-home inventory even as buyer affordability remains strained.
What Investors Should Watch Next
The direction of Treasury yields is likely to matter more for mortgage rates in the coming weeks than any single weekly Freddie Mac reading.
Inflation will be a major catalyst. Waller’s comments made clear that the Fed’s September decision remains dependent on incoming August data, with policymakers balancing inflation that remains above the central bank’s 2% goal against indications that some underlying price pressures are easing.
Energy markets are another risk. A sustained increase in oil prices tied to the U.S.-Iran conflict could keep inflation expectations elevated, putting upward pressure on Treasury yields and mortgage borrowing costs even if other areas of inflation cool.
For housing-related stocks, prolonged mortgage rates near 7% could continue to restrain transaction volumes for real estate brokers, mortgage lenders and title companies while making demand more difficult to sustain for homebuilders. Builders may partially offset the pressure through mortgage-rate buydowns, discounts and other incentives, but those measures can come at the expense of margins.
A meaningful drop in Treasury yields would change that equation quickly. Lower mortgage rates would improve buyers’ purchasing power, potentially unlock additional existing-home inventory and create a more favorable backdrop for home sales and housing-related companies.
For now, Freddie Mac’s 6.71% average puts the 30-year mortgage just below the 6.72% level reached in July 2025 and increasingly close to the psychologically important 7% threshold. Whether rates break through that level or retreat will depend heavily on inflation, Treasury-market conditions and what the Fed signals when policymakers meet September 15-16.