Mortgage rate hits 7.28%, its largest weekly gain in four years

The average interest rate on a 30-year mortgage jumped to 7.28% Thursday, posting its largest weekly gain in four years, according to Freddie Mac. Last week, the average rate was 7.03%.

The jump was driven by turmoil in the bond market, which has increased 10-year Treasury yields to a multi-decade high above 5% as the Iran war drags on and increases government spending that could further exacerbate already elevated inflation, analysts say.

When 10-year Treasury yields increase, mortgage rates tend to rise because lenders use it as a benchmark, according to Fannie Mae, which says mortgage rates are based on the difference between the rate on a 30-year mortgage and a 10-year Treasury note and represents industry costs and risk.

The rate on a 15-year fixed-rate mortgage is now 6.6%, up from 6.42% last week and 5.55% a year ago, Freddie Mac said Thursday.

The increasing mortgage rates are dampening the housing market. Realtor.com said Wednesday that new listings and pending sales both fell in September while price cuts increased to their highest September level since 2018.

Realtor.com said 20.8% of listings had their price reduced last month, while active listings increased 5.5% year over year and pending sales fell 4.1%.