US Mortgage Rate Hits Highest Level Since January as Fed Hikes Interest Rates Again
The US mortgage rate rose to 6.95% for the fourth consecutive week, reaching its highest level since January 2025. This increase is a result of the Federal Reserve's decision to raise the federal funds rate target range by 25 basis points to 3.75%-4.00%. The Fed aims to combat inflation, which remains elevated, but this move will likely put more pressure on homebuyers.
The average US home price is around $440,000, and with mortgage rates approaching 7%, housing affordability has become a significant issue. According to estimates by Intercontinental Exchange Inc., a typical household now needs to spend about 31% of the median family income on mortgage payments, the highest proportion since July 2025.
Freddie Mac reported that pending home sales in August rose just 0.3% month-over-month but fell 4.7% year-over-year. The National Association of Realtors' Chief Economist Lawrence Yun noted that despite rising mortgage rates, there were still buyers signing home purchase contracts in August, while the overall US housing market remains sluggish.