WASHINGTON — The average rate on a 30-year fixed mortgage rose to 7.12% last week, its highest level since May 2024, adding to the pressure on homebuyers and slowing demand for purchase and refinance loans.
The rate increased from 6.97% in the week ended Sept. 18, according to the Mortgage Bankers Association. Mortgage applications fell 1.5% from the previous week on a seasonally adjusted basis. Refinance applications dropped 3%, while purchase applications declined 1%.
The increase came as the Federal Reserve raised its short-term benchmark rate by a quarter of a percentage point, to a range of 3.75% to 4%, in an effort to bring inflation down. Mortgage rates do not move in lockstep with the Fed’s rate. They more closely track longer-term Treasury yields, which Reuters reported have risen amid higher oil prices and concern about inflation.
As the CU Daily has previously reported, mortgage rates have climbed by more than a full percentage point since U.S.-Israeli strikes against Iran began pushing up global oil prices in late February. Higher borrowing costs have further strained affordability for prospective buyers and weighed on the housing market.
More Borrowers Turn to ARMs
As fixed rates climbed, adjustable-rate mortgages accounted for 9.8% of applications last week, the MBA said. Those loans generally carry lower initial rates but can reset after a specified period, changing borrowers’ payments. MBA chief economist Mike Fratantoni said rates on five-year adjustable mortgages were more than a percentage point below rates on fixed-rate loans.
The MBA said refinance applications were 62% below their level a year earlier. Purchase applications were down 11% from a year earlier on an unadjusted basis. The figures point to a tougher market for mortgage lenders, including credit unions, as higher rates limit opportunities to refinance and cause some prospective buyers to postpone a purchase.
