The cost of financing a home in the US moved higher this week, adding another challenge for buyers already facing stretched housing budgets.
The average 30-year fixed mortgage rate reached its highest level since July 2025 as higher Treasury yields and renewed inflation concerns put pressure on borrowing costs.
The average 30-year fixed-rate mortgage increased to 6.71%, up from 6.66% the previous week, according to mortgage finance agency Freddie Mac. The latest increase marks the highest average rate recorded since July 2025.
Mortgage rates generally follow movements in US Treasury yields. Those yields have climbed in recent weeks as investors assess rising government borrowing, increased demand for capital from companies investing in artificial intelligence infrastructure, and concerns that the US-Iran conflict could add to inflation.
Higher energy prices linked to renewed hostilities in the Middle East have also raised concerns about additional price pressure.
Inflation Remains a Concern
The Federal Reserve continues to monitor inflation closely. Its preferred measure, the personal consumption expenditures (PCE) price index, has remained above the central bank’s 2% target for about 5 1/2 years and gained strength earlier this year.
However, recent inflation readings have offered some relief. Federal Reserve Governor Christopher Waller said the latest two monthly reports showed signs of easing.
“Mortgage rates are not low, auto loans are not — rates are not low,” Waller said at a Reuters Next event in Washington. He added that housing conditions and higher vehicle costs do not point to easy financial conditions.
Waller said another encouraging inflation report for August could make him comfortable with not raising rates at the Fed’s September 15-16 meeting.
Treasury Yields Drive Borrowing Costs
The 10-year Treasury yield fell to 4.744% on Thursday, following a sharp rise to 4.818% on Wednesday, its highest level since November 1, 2023.
For prospective homebuyers, the latest move means higher monthly payments and greater borrowing costs. Even a modest change in mortgage rates can affect affordability, especially when home prices remain elevated.
Mortgage rates will continue to depend heavily on inflation data, Treasury yields, and expectations for Federal Reserve policy. If price pressures ease, borrowing costs could stabilize. If inflation rises again, mortgage rates may remain under pressure.