Mortgage rates soared past 7% last week, reaching their highest level in more than two years, according to data from the Mortgage Bankers Association.
The 30-year fixed-rate mortgage rose to 7.12% the week ending Sept. 18, the MBA said. It was last that high in May 2024, according to the mortgage industry group.
The higher rates add to buyers' borrowing costs at a time when housing prices remain near record highs. As fixed rates continued to climb, more buyers opted for riskier adjustable-rate mortgages, which offer a lower initial rate, Mike Fratantoni, senior vice president and chief economist at the MBA, said in a statement.
Rates for 5/1 adjustable-rate mortgages, which offer a fixed interest rate for the first five years before adjusting based on market conditions, were more than 1% lower than fixed-rate mortgages, Fratantoni said.
Freddie Mac will release its own data on the 30-year fixed-rate mortgage on Thursday. Mortgage rates were 6.95% as of Sept. 17, Freddie's data shows.
The 30-year fixed-rate mortgage tends to follow the 10-year Treasury yield, which has spiked in recent weeks as investors fret over inflation, government debt and higher borrowing costs.
Last week, the Federal Reserve announced it was hiking interest rates by a quarter of a percentage point, a highly anticipated move that some lenders priced into rates, Jake Krimmel, a senior economist at Realtor.com, previously told CBS News.
The 10-year Treasury was hovering around 5% on Wednesday, up more than a percentage point since the war in Iran started in late February.
The housing market normally slows as the summer season winds down. However, higher rates could further stall activity as buyers navigate higher borrowing costs.
"Although the pipeline of potential homebuyers remains large, affordability challenges and rate volatility could stall origination growth, particularly if elevated rates persist," Richard Shane, head of consumer and specialty finance research at J.P. Morgan, said in a July post.
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