WASHINGTON — Mortgage rates climbed to their highest level in a year this week as financial markets reacted to persistent inflation concerns, the Federal Reserve’s latest policy decision and escalating tensions in the Middle East, even as a separate housing affordability measure showed a modest improvement for prospective homebuyers.
The average rate on a 30-year fixed mortgage rose to 6.66% for the week ending July 30, the highest level since July 2025, according to Freddie Mac data.
The increase followed the Federal Reserve’s decision Wednesday to leave its benchmark interest rate unchanged. However, concerns grew after three members of the Fed’s policymaking committee voted in favor of raising rates, prompting investors to anticipate additional monetary tightening later this year.
Mortgage rates, which generally track the yield on the 10-year Treasury note, also moved higher as renewed conflict involving Iran fueled worries that higher oil prices and shipping disruptions could add to inflationary pressures.
‘Treasury Yields Surge’
“While it’s unclear if or when the central bankers might raise the funds rate, there’s plenty of concern that inflation’s running unchecked,” Kate Wood, a lending expert with NerdWallet, told CBS News. “Between that and Iran, we’re seeing Treasury yields surge, and mortgage rates are being dragged up along with them.”
Although new government data released Thursday showed the Federal Reserve’s preferred inflation gauge eased in June, inflation remains above the central bank’s 2% target.
Deutsche Bank now expects the Fed to raise its benchmark rate twice before year-end by a combined one-half percentage point, according to CBS News.
Housing Affordability Improves
At the same time, the Mortgage Bankers Association reported that homebuyer affordability improved slightly in June, despite elevated borrowing costs.
According to the MBA’s Purchase Applications Payment Index, the national median monthly mortgage payment for new purchase applications fell to $2,191 in June from $2,198 in May. The index declined 0.3% to 157.9, reflecting a modest improvement in affordability.
MBA Associate Vice President Edward Seiler said lower average loan amounts offset rising mortgage rates, reducing the typical monthly payment by $7 from the previous month. Household earnings also increased 4.6% over the past year, helping improve affordability compared with a year earlier, according to the MBA data reported by HousingWire.
The median monthly payment for borrowers seeking lower-payment loans fell to $1,522 from $1,532 in May.
Variances by Loan Type
Affordability varied by loan type. The median payment for Federal Housing Administration borrowers slipped to $1,872 from $1,873 in May, while the median payment for conventional loan applicants declined to $2,209 from $2,211 the previous month.
Regional differences remained significant. The MBA said Idaho, Nevada, Arizona, Rhode Island and Utah had the nation’s highest payment-to-income ratios, while Louisiana, the District of Columbia, Vermont, New York and West Virginia posted the lowest.
The association also reported modest affordability improvements across demographic groups. Its affordability index declined slightly for Black, Hispanic and White households in June, indicating mortgage payments consumed a smaller share of income than in the previous month.
While affordability for existing-home purchases improved modestly, the MBA reported that payments associated with newly built single-family homes increased. The median monthly payment on applications for new construction rose to $2,199 in June from $2,173 in May.
