US Mortgage Rates Exceed 7% to Two-Year High
The contract rate on a 30-year fixed mortgage reached 7.12% last week, marking the highest point since May 2024 and dampening home financing applications.
Thirty-Year Mortgage Rate Climbs
The US 30-year fixed mortgage contract rate climbed to 7.12% in the week ending 18 September, according to data from the Mortgage Bankers Association. This 15 basis point (bps) increase pushed borrowing costs to their highest level since May 2024. The rise reflects broader pressure in the housing market, which continues to face elevated prices and slow sales.
In contrast, the five-year adjustable-rate mortgage (ARM) saw a 13 bps decrease, settling at 6.1%. This overall upward trend in rates began in February 2026, influenced by rising energy prices and renewed inflation concerns.
Federal Reserve Action and Loan Demand
The Federal Reserve last week implemented its first benchmark interest rate increase since 2023, aiming to curb price pressures. This monetary tightening has directly impacted demand for home financing. The Mortgage Bankers Association's (MBA) purchase index, which tracks loan applications, dropped by 0.8%, reaching a four-week low.
Similarly, the MBA refinance index fell 2.6%, marking its lowest point since February 2025. Daryl Fairweather, chief economist at Redfin, noted the psychological impact of rates surpassing 7%, expecting it to suppress home-price growth while sales remain sluggish.
Housing Market Slowdown Deepens
The US housing market shows further signs of contraction. Sales of previously owned homes declined in August 2026, recording their weakest performance in over a year. Builder confidence this month matched its lowest level since late 2022, a consequence of higher borrowing costs and increased prices for building materials and fuel.
Residential construction employment has generally trended downwards since its peak in September 2024. Ben Ayers, senior economist at Nationwide, characterises the housing sector as being in a recession, though he believes it is unlikely to trigger a wider economic downturn.
Mortgage rates are expected to stay around 7% through the end of 2026, mirroring the 10-year US Treasury yield, which is near a two-decade high. However, Hannah Jones, a senior economist at Realtor.com, suggests the market may be nearing its bottom, with essential life events like marriages and job changes providing some underlying demand.
For Asian economies, a sustained period of high US interest rates can influence capital flows and currency valuations. Investors in Singapore and other regional markets may observe a stronger US dollar, potentially impacting the cost of imports and the attractiveness of US dollar-denominated assets.
This could also pressure central banks in Asia to maintain hawkish stances to prevent capital outflows, affecting local borrowing costs.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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