The 30-year mortgage rate jumped to a 13-month high, Freddie Mac data shows

The 30-year rate is at its highest level since July 2025.

Mortgage rates ticked up to a new high for the year, casting a chill over the housing market.

The 30-year mortgage rate jumped 5 basis points to an average of 6.71%, according to new data on Thursday from Freddie Mac.

That's the highest level for the 30-year rate since late July 2025 - about 13 months ago.

Even a couple of basis-point increases in rates push up home buyers' borrowing costs by a few hundred dollars in extra costs.

Mortgage rates are sensitive to political news. The 30-year rate rises and falls in tandem with the 10-year Treasury note (BX:TMUBMUSD10Y). The 10-year yield has been rising over the past week due to renewed escalation in the U.S.-Iran conflict, rising oil prices, as well as a probable interest-rate increase by the Federal Reserve to quell inflation.

That means 7% mortgage rates are a real possibility. Another daily read of mortgage rates by Mortgage News Daily, which runs a daily survey of lenders, said the 30-year rate averaged 6.91% as of Tuesday, Sept. 2.

"I expect the average 30-year fixed mortgage rate to touch 7% in September. We're already close enough that it would not take a major move in the bond market to get there," Jim Bell, a former mortgage-backed-securities trader and an executive at Sotheby's International Realty, told MarketWatch.

"Most mortgages are still under 7%, but we are getting close to hitting the number," Michael Read, principal at Bridgeway Mortgage and Real Estate Services in Morristown, N.J., told MarketWatch.

The move to 7% is a key psychological threshold for the housing market, Bell said.

At the same time, buyers might not react as much as they have in the past "because [they] are already adjusting to elevated rates," he added.

More buyers are switching to adjustable-rate mortgages, or ARMs, to reduce their initial monthly payments, Bell noted.

The share of home buyers going for ARMs over conventional mortgages, rose to a five-week high in early September, according to data from the Mortgage Bankers Association, a trade group.

ARMs have historically been viewed as riskier than fixed-rate mortgages. ARMs typically start with a lower interest rate at the start of a set period, and then adjust periodically. The risk is that monthly payments can fluctuate over the life of the loan, as mortgage rates change. ARMs were also very popular during the run-up to the 2008-09 global financial crisis.

Some buyers are already seeing 7% mortgage rates, which are subjective and typically based on how risky a borrower is. Mortgage borrowers with low credit scores, low down-payment amounts or "unique" personal situations are seeing quotes over 7%, Jason Madiedo, co-CEO of SimplyPMG, a mortgage lender, told MarketWatch.

Many borrowers with higher credit scores, who put more money down on a home and have a stable financial situation, are generally more likely to get a mortgage rate below 7%, he added.

Like Bell, Read doesn't anticipate 7% mortgage rates to spook buyers that much. "Prospective buyers are already aware that we are in a rising rate environment, so these numbers should not come as a shock," he said.

Don't expect rates to go much lower soon. "We don't expect any real mortgage rate relief this fall," Jiayi Xu, a senior economist at Realtor.com, said in a statement. "If inflation isn't tamed, the pain will be real."

Consumers are in a difficult spot with no good solution. "Higher inflation would simultaneously erode paychecks and real income growth while keeping mortgage rates elevated for longer," Xu said.

"That's a squeeze on housing from both sides: what people can afford, and what they're willing to buy into," she added.

For housing to become as affordable as it was back in 2019, either the median home price would need to fall by more than 30%, or the 30-year mortgage rate would need to drop to 3%, Lisa Sturtevant, the chief economist at Bright MLS, said in a statement.

"Neither of these scenarios is expected," she added, "which means the road back to improved affordability in the homeownership market is going to be slow."

-Aarthi Swaminathan