US mortgage rates hit their highest level since 2023, further eroding housing affordability with just a month to go before Americans vote in midterm elections.
The 30-year fixed mortgage rate averaged 7.4 per cent as of October 8, an increase of 0.12 percentage points from a week ago, Freddie Mac data showed on Thursday.
Mortgage rates have increased for seven consecutive weeks, the longest run in three years and adding 0.84 percentage points to borrowing costs over that period. Rates are now at their highest since early November 2023.
The recent ascent has been fuelled by rising yields on Treasuries due to the inflationary pressures of US President Donald Trump’s war against Iran and expectations the Federal Reserve will continue to raise interest rates in an effort to tamp down on the rise in price levels.
The rise in mortgage rates presents a source of consternation for Republicans as they battle to keep control of the US Senate and House during November’s midterm elections.
The Fed in September increased its benchmark funds rate for the first time in three years as it seeks to prevent the surge in energy prices from spiralling into a broader inflationary crisis.
Traders are attaching just a 20 per cent chance that the US central bank will raise rates at its next meeting later this month, just days before the midterm elections, but see a 76 per cent chance that the Fed will have raised rates at least once by the end of 2026.
The 30-year mortgage rate dipped below 6 per cent in late February for the first time since September 2022, days before the US and Israel launched strikes on Iran. It has risen 1.4 percentage points since the start of the conflict.
That has contributed to a darkening mood in the housing market over the past few months, with the cost of construction up and potential sellers waiting it out until rates climb back down.
“Buyers are pulling back in response to ongoing affordability challenges, while sellers are showing flexibility,” said Hannah Jones, Realtor.com senior economist.
About one-fifth of listings had a price cut last month, according to Jones, which was the highest share in four years. Inventory and pending home sales were also soft.
“Altogether, September’s housing data points to a market stalled by mounting affordability pressure. Buyers have more options at lower price points, but elevated mortgage rates keep home ownership out of reach for many,” Jones said.