The 30-year mortgage rate jumped 18 basis points in two days

The 30-year mortgage rate reached the highest level since May 2025

Mortgage rates crossed 7% on Thursday, making it even more expensive for people looking to buy a home with a loan.

The 30-year fixed-rate mortgage averaged 7.07% as of Thursday afternoon, according to a survey of lenders compiled by Mortgage News Daily. The 30-year mortgage rate went up 18 basis points over the last two days, per MND's data.

According to Ali Wolf, chief economist at Zonda, "7% interest rates are already the reality for many consumers today," Wolf told MarketWatch that "as investors get scared about inflation and government debt levels, consumers pay the price via higher borrowing costs."

Mortgage rates don't directly follow the direction of the Federal Reserve's benchmark short-term interest rate; instead, they tend to move in tandem with the yield on the 10-year Treasury note, which rises when investors see coming inflation.

The bond market is sensitive to political developments. "The conflict in Iran continues to keep oil prices and inflation expectations elevated, pushing Treasury yields toward their highest levels in more than a year. Each round of renewed tensions has reinforced the same dynamic that has driven [mortgage] rates higher since late February," Anthony Smith, a senior economist at Realtor.com, said in a statement.

"Oil prices rise, inflation fears follow, and bond markets reprice accordingly," Smith said. "Until there is meaningful relief on inflation or a durable resolution to the conflict in Iran, that backdrop is unlikely to change."

A separate report by Freddie Mac, a government-backed agency, noted a smaller increase in the 30-year rate. They reported that the 30-year fixed-rate mortgage averaged 6.76%. Their figure is derived from mortgage applications submitted to the enterprise, which packages and resells the loans on the secondary market.

Higher mortgage rates will likely continue to choke the housing market. With every basis point increase, home buyers will likely see a higher monthly mortgage payment.

Higher mortgage rates typically translate to lower demand. "Mortgage rates and home sales move in opposite directions, so it's not surprising to see a mild dip in home buying activity due to high mortgage rates," Lawrence Yun, chief economist at the National Association of Realtors, said on Thursday. The NAR reported that home sales fell in August, even as more sellers put their homes up for sale.

The road ahead looks rough for the housing sector. "We see little prospect of existing sales picking up significantly in the near term, given that mortgage rates continue to creep higher, while mortgage purchase applications remain soft," Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics, wrote in a note.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

-Aarthi Swaminathan