The average 30-year fixed-rate mortgage leaped to 7.03% on Thursday, according to the Federal Home Loan Mortgage Corp., which also goes by Freddie Mac.

This is the first time the rate has passed the 7% mark in 20 months, or since January 2025. While the 7% mortgage rate milestone holds no literal significance beyond the psychological effect of the round number, the sharp rise in rates since March risks further squeezing the budgets of homebuyers. And it's bound to deepen the freeze on a housing market held stagnant for years by the high cost of homeownership.

Mortgage rates tend to follow the 10-year Treasury note, which has risen sharply over the summer amid concerns about high inflation as well as the size of the federal debt.

The Federal Reserve last week raised its benchmark interest rate by a quarter percentage point — its first move this year — and many policymakers projected it may raise it one more time before year's end. Investors are bracing for potentially even more rate hikes to help fight inflation.

High mortgage rates contributed to a 2% decline in existing home sales in August from the previous month, according to the National Association of Realtors.

The median sale for an existing home was about $429,000. At that price, a single percentage point increase in the mortgage rate can cost buyers hundreds of additional dollars a month and tens of thousands over the life of the loan.

Housing researchers had hoped 2026 would provide a break for buyers and sellers waiting for cheaper rates and those savings. For a brief moment, that seemed to happen as mortgage rates fell below 6% by the end of February.

But they quickly shot back up with the war with Iran, which has led to volatility in the bond markets. Continued fighting has also prolonged worries about inflation, further helping push up mortgage rates.

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