7% Mortgage Barrier: Fed Hikes Fuel Housing Market Grief as Inflation Soars

Mortgage rates climbed past 7% for the first time since January 2025 according to federal lender Freddie Mac. This milestone aggravates a housing market that has endured years of high interest rates and low supply. The increase follows a decision by the US Federal Reserve to raise interest rates for the first time since 2023. The central bank cited high inflation as the reason for this move. Data shows rates on 16 September rose by a quarter of a point to a range of 3.75% to 4%.

This figure contrasts with last year when the Freddie Mac 30-year-mortgage rate trended down from 7.79%. That generational high occurred in late 2023. Rates have crept back up since late February. The timeline includes the launch of the war between the US and Israel and Iran. The conflict drove inflation to its highest levels in three years and sharply increased energy prices. Brent crude the international benchmark for oil topped $105 earlier on Thursday.

The 10-year US treasury yield also reached its highest level since July 2007. This yield underpins the 30-year mortgage rate and other borrowing costs. Investors raised expectations for another Fed rate hike next month. The 30-year Treasury yield hit its peak since 2004. Earlier in September US treasury secretary Scott Bessent announced the Treasury would triple its buyback of government debt. Despite this action yields continued to rise.

Existing home sales hit their 2026 low in August according to Anthony Smith a senior economist at Realtor.com. Pending sales turned negative year over year. Smith stated that a 7% handle is as much psychological as mathematical. He noted it arrives at the point in the season when leverage usually shifts toward buyers. High mortgage rates are just one of the many reasons why Americans struggle to attain home ownership. Wages have not kept pace with higher inflation and everyday costs have increased.