US Mortgage Rates Soar to New Highs Above 7% Amid Bond Market Selloff

The average 30-year fixed mortgage rate in the US has topped 7% for the first time, according to Freddie Mac's latest Primary Mortgage Market Survey. This marks the fifth consecutive weekly increase in the 30-year rate and leaves borrowing costs well above the 6.3% average from a year ago.

The immediate cause of this rise is not solely due to the Federal Reserve's recent decision to raise its benchmark rate by 25 basis points to 3.75%-4.0%. Mortgage rates are heavily influenced by the bond market, and the 10-year Treasury yield finished September 25 at 5.17%, after reaching even higher levels earlier in the week.

The recent bond selloff has been driven by a mix of strong economic data, elevated energy prices, inflation concerns, and heavy government borrowing. These forces have pushed the 10-year yield above 5% before mortgage rates crossed 7%. This means that homebuyers can expect to pay around $1,996 per month for a $300,000 30-year mortgage at 7%, compared to roughly $1,896 at 6.5%, before taxes and insurance.