Mortgage Rates Cross 7 Percent, the Highest in More Than a Year

Freddie Mac's Primary Mortgage Market Survey put the average 30-year fixed rate at 7.03 percent for the week of September 24, up from 6.95 percent a week earlier. It was the fifth weekly increase in a row, and the recent climb has been quick: the average was 6.71 percent on September 3 and 6.76 percent on September 10. A year ago it stood at 6.30 percent. In late January, rates were near 6.10 percent, close to their lowest level in three years at the time.

Why rates are rising

Mortgage rates follow the 10-year Treasury yield more than the Fed's overnight rate, and both have been pushed by the same forces: inflation running at 3.4 percent with an energy shock underneath it, and a Fed that raised its target range on September 16 and projects another increase this year. Freddie Mac's chief economist, Sam Khater, pointed to a solid labor market and a healthy economy as support for housing. That strength is part of why rates are high.

What the move costs

On a $400,000 loan, principal and interest at 7.03 percent come to about $2,669 a month. At January's 6.10 percent the same loan cost about $2,424, so the difference is roughly $245 a month, or about $2,944 a year. Against last September's 6.30 percent, the gap is about $193 a month.

Keep in mind who the survey describes: a conventional, conforming purchase loan with 20 percent down and excellent credit. Buyers with smaller down payments or lower scores are quoted higher, so treat 7.03 percent as a benchmark rather than your rate.

How to shop in a rising market

Get at least three quotes on the same day. Lenders reprice daily, so quotes from different days aren't comparable. Ask each lender what a rate lock costs and how long it lasts; a longer lock usually costs more but protects you if closing slips. Compare the full cost, including points, rather than the headline rate alone. And run the payment at 7 percent, not the rate you hoped for, in our home affordability calculator. Our guide to the real cost of homeownership adds taxes, insurance and upkeep.

If you already hold a low fixed rate, keep it. Refinancing makes sense only when the new rate is meaningfully below your current one, and our refinancing guide walks through the break-even math. In late May the 30-year averaged 6.53 percent (our May report); it has risen half a point since.