US mortgage rates climb to 7.12%, highest level in over two years

The 30-year fixed mortgage rate hit 7.12% for the week ending September 18, according to data released by the Mortgage Bankers Association on September 23. That’s a 15 basis point jump from the prior week and the highest reading since May 2024.

For anyone trying to buy a home right now, the math just got considerably worse. A full percentage point increase in mortgage rates since late February means thousands of dollars more in annual interest payments on a typical home loan.

The numbers behind the squeeze

The MBA’s figures weren’t the only data point flashing red. Freddie Mac’s own weekly survey, published slightly earlier, pegged the 30-year fixed average at 6.95% as of September 17. That was up from 6.76% the prior week and marked the highest level since January 2025.

The gap between the two surveys is methodological, not contradictory. MBA tends to capture rates with points and fees included, while Freddie Mac’s approach differs slightly.

Applications for home purchases have declined alongside the rate increases. Refinancing activity, which briefly picked up when rates dipped earlier this year, has also pulled back. The one pocket of growth sits in adjustable-rate mortgages, where borrowers are gravitating toward lower initial rates even if it means accepting future uncertainty.

What’s driving rates higher

Two forces are converging to push mortgage rates upward: Federal Reserve policy and geopolitical turbulence in energy markets.

The Fed’s policy rate currently sits in the 3.75%-4.00% range, a level calibrated to wrestle inflation back toward the central bank’s 2% target. Persistent price pressures, particularly from energy costs, have kept the Fed from pivoting toward cuts. Treasury yields, which mortgage rates track closely, have risen in tandem.

The US-Israeli military strikes on Iran that began in late February have roiled global energy markets. Higher crude prices feed directly into inflation expectations, which push Treasury yields higher, which drag mortgage rates up with them.

A housing market running out of oxygen

The broader housing market was already operating under severe constraints before this latest rate spike. Inventory remains tight in most metropolitan areas because existing homeowners locked into sub-4% mortgages during the pandemic era have little incentive to sell and re-enter the market at 7%. Economists call this the “lock-in effect,” and it has functionally frozen a huge portion of the housing stock.

The pivot toward ARMs deserves particular attention from anyone watching consumer credit risk. Adjustable-rate products accounted for a growing share of applications in recent weeks as borrowers hunt for any way to reduce initial monthly payments. These loans reset to prevailing market rates after their introductory period, typically three to seven years.

Lending standards remain substantially tighter than the pre-2008 era, and the borrower credit profile on today’s ARMs skews higher quality. Still, the behavioral shift toward variable-rate debt in a rising-rate environment is worth monitoring.