U.S. Mortgage Rates Break Above 7%, Highest in More Than Two Years

【Financial News New York—Lee Byung-chul, correspondent】  U.S. mortgage rates surged to their highest level in more than two years, once again breaking above 7%. Yields on United States Treasury securities (U.S. Treasuries) rose as Federal Reserve System (Fed) rate hikes coincided with higher oil prices following the war in Iran. Unable to withstand high fixed rates, borrowers are shifting to adjustable-rate mortgages with relatively lower rates. About one in 10 mortgage applicants is now choosing an adjustable-rate mortgage.
According to the Mortgage Bankers Association of America (MBA) on the 23rd local time, the average rate on 30-year fixed-rate mortgages for the week ending on the 18th rose 15 basis points from 6.97% the previous week to 7.12%. This was the highest level since May 2024.
The direct cause of the sharp increase in mortgage rates was the rise in U.S. Treasury yields. The yield on the 10-year U.S. Treasury, a benchmark for 30-year mortgage rates, recently climbed to around 5%, its highest level in nearly 20 years. It has risen by about 1 percentage point from roughly 4% before the war in Iran.
Expectations of further Fed tightening are also pushing rates higher. On the 16th, the Fed raised its policy rate by 0.25 percentage point to 3.75–4.00%. Most Fed officials expect at least one additional rate hike this year. The point at which inflation fully returns to the 2% target has also been pushed back to 2029, a year later than previously forecast.
The impact of the rate shock is quickly spreading to the housing market. Total mortgage applications fell 1.5% last week from the previous week. Refinancing applications dropped 3% to their lowest level since February 2025, plunging 62% from a year earlier. Mortgage applications for home purchases also declined 1% from the previous week and 11% from the same period a year earlier.
Instead, borrowers are flocking to adjustable-rate mortgages (ARMs). The share of ARMs among all mortgage applications jumped from 8.4% to 9.8% in just one week. That is more than three times the roughly 3% recorded during the low-rate period at the beginning of the COVID-19 pandemic.



[email protected] Lee Byung-chul, correspondent Reporter