US Mortgage Rates Rise to 6.81%, Highest Level in a Year

The contract rate on a 30-year mortgage rose 5 basis points to 6.81% in the week ended July 31, according to Mortgage Bankers Association data released Wednesday.

Rates fell to their lowest levels since 2022 toward the end of February, just before the start of the Iran war. Since then, they've trended higher as the conflict pushed up energy prices and stoked inflation concerns.

The result has been weaker demand for loans. MBA's purchase index, a measure of loan applications, fell 3.6% from the prior week to a five-month low, while its refinancing index slid 1.9% to the lowest since mid-2025.

The Federal Reserve last week further complicated the outlook for borrowers. The central bank held its benchmark interest rate steady, as expected. But Chairman Kevin Warsh's post-meeting press conference raised concerns about the Fed's commitment to its 2% inflation goal. In response, investors pushed bond yields higher.

Mortgage rates closely track the yield on 10-year Treasury notes. At the end of July, 10-year yields touched their highest level since early 2025.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.

What will happen to mortgage rates in the rest of 2026?

The Federal Reserve said last month that its benchmark rate will remain unchanged, a decision that was "unanimous and unambiguous," said Kevin Warsh, the new chairman of the central bank.

Inflation retreated in June to 3.8%, down from May. Oil prices have also spiked amid the conflict in Iran, pushing inflation up and lifting mortgage rates from their 2026 low of 6.09%. The Federal Reserve has opted to hold its benchmark rate steady at recent meetings, and now it's possible that the Fed might raise rates as early as September. Rising inflation has been the main driver of higher mortgage rates — the consumer price index has pushed well above the Fed's 2% target.

Housing economists no longer expect mortgage rates to fall below 6% in the near future, a reality that's affecting home sales. Higher mortgage rates, still-record home prices and persistent inflation are likely to push the brakes further on home sales.

"The market continues to balance mixed economic signals, as inflation is easing but remains above the Federal Reserve's long-term target, and the economy is resilient enough to keep investors cautious about the timing of future policy changes," says Anthony O. Kellum of Kellum Mortgage.

Methodology

The Bankrate.com national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We've conducted this survey in the same manner for more than 30 years, and because it's consistently done the way it is, it gives an accurate national apples-to-apples comparison. Our rates differ from other national surveys, in particular Freddie Mac's weekly published rates. Each week Freddie Mac surveys lenders on the rates and points based on first-lien prime conventional conforming home purchase mortgages with a loan-to-value of 80%. "Lenders surveyed each week are a mix of lender types — thrifts, credit unions, commercial banks and mortgage lending companies — is roughly proportional to the level of mortgage business that each type commands nationwide," according to Freddie Mac.

Source: YahooFinance