U.S. 30-Year Mortgage Rate Hits 7.12% as Fed Raises Policy Rate

The average rate on a 30-year fixed-rate mortgage increased by 15 basis points to 7.12% in the week ended September 18, according to the Mortgage Bankers Association. The level is the highest since May 2024 and follows the Federal Reserve's recent quarter-point hike of its policy rate to the 3.75%-4.00% range.

The Fed’s move aims to bring inflation, which has remained above the central bank’s 2% target for more than five years, back toward its goal. Higher short-term rates and rising oil prices have pushed Treasury yields higher, which in turn lifts residential borrowing costs.

Mortgage rates have risen more than a full percentage point since late February, when geopolitical tensions involving Iran contributed to higher global oil prices. The increase in rates has reduced refinancing and home-purchase applications, and the share of adjustable-rate mortgage applications rose to 9.8% last week, as borrowers seek lower initial costs.

"The rise in mortgage rates last week led to a decline in refinancing and home purchase applications, and drove more borrowers into adjustable-rate mortgages," the Mortgage Bankers Association said.

Traders expect further Fed rate hikes before the end of the year, and most policymakers have signaled at least one additional increase.