US mortgage rates exceeded 7% for the first time since January 2025, driven by Federal Reserve rate hikes citing inflation and geopolitical tensions from the US-Israel war with Iran. The housing market continues to struggle with high rates, low supply, and affordability challenges affecting consumer sentiment ahead of midterm elections.
The Federal Reserve raised its benchmark interest rate to 3.75%-4% on September 16 to combat inflation, but this does not directly set mortgage rates, which instead follow the 10-year Treasury yield. Mortgage rates climbed to 7% due to multiple factors including inflation expectations, geopolitical tensions, and oil prices, with the Fed's rate hike playing only an indirect role through its influence on Treasury yields.