The average 30-year fixed mortgage rate hit 7.49% in the week ended October 2, according to the Mortgage Bankers Association. That is the highest since November 2023, and 19 basis points above the 7.30% of the week before, itself a three-year high. Rates were at three-year lows in December. Nine months, a Middle East war and a global bond rout later, they sit at the opposite end of the range.
The 10-year yield is doing the work
Mortgage rates follow the 10-year Treasury yield far more closely than the federal funds rate, which is why Fed cuts would not pass straight through to borrowers. The 10-year closed at 5.27% in the latest session cited, its highest close in 24 years. ZeroHedge, which tracked the move, said it had its biggest quarterly jump since 1994. Reuters noted that home borrowing rates are up about 1.4 percentage points since US-Israeli strikes on Iran began in late February. Daily lender indices have already moved past the weekly surveys: Freddie Mac’s October 1 reading was 7.28%, up from 7.03% a week earlier, while a leading daily index showed 7.56%.
Forecasters have been caught out. Two major houses projected 6.8% by year-end in September, below every current reading. A Reuters poll of nearly 60 strategists, conducted October 5 to 7, still has the 10-year easing to 5.00% by December. The same group has underestimated the yield in nine straight monthly polls this year.
What it costs a buyer
On a $400,000 loan, principal and interest at 7.49% comes to roughly $2,794 a month, ZeroHedge calculated. At the 6.1% or so that prevailed before the war it was about $2,424, a difference of $370 a month for the same house. AOL, using a 7.46% rate, put the monthly figure at $2,786 against $2,460 a year earlier.
Demand has buckled. MBA data showed mortgage applications fell another 4.2% in the week, and overall volume is the lowest since February 2025, down nearly 50% since January. A separate weekly survey cited by AOL had applications down 6.0% and refinancing down 56% from a year earlier. Existing-home sales fell 2.0% in August to an annual rate of 3.98 million, at a median price of $429,100. Owners with cheap old mortgages are not selling.
Builders pay to keep sales moving
Lennar shows the strain. In its fiscal third quarter, adjusted earnings of $1.23 a share missed the $1.2963 consensus. Homebuilding gross margin dropped to 15.8% from 17.5%, new orders fell 9%, and full-year delivery guidance was cut to 80,000 to 81,000 homes. Incentives, mostly rate buydowns, ran to about 12.0% of sales. CEO Stuart Miller said on the earnings call that the company was “compromising margin in order to maintain volume”, with the 30-year rate “at approximately 6.8% at quarter end and even higher since.”
Builder stocks rose anyway on October 6. Lennar gained 3.99% to $77.41 and the iShares U.S. Home Construction ETF added 1.66% to $87. The next check is Freddie Mac’s October 8 reading. A print above 7.28% would make a fourth-quarter Lennar margin at or below 15.5% likely, against the company’s 15.5% to 16.0% guidance.
Sources
- From 3-Year Lows To 3-Year Highs In Nine Months: Mortgage Rates Surge To 7.49% As Bond Rout Hits Main Street
- The 30-Year Mortgage Is Closing In on 7.5% – AOL
