US mortgage interest rates rose to 6.97%, a record high in more than a year

The Zhitong Finance App learned that US mortgage interest rates rose to their highest level in more than a year last week, adding another blow to the already sluggish property market. According to data released by the American Mortgage Bankers Association (MBA) on Wednesday, interest rates on 30-year mortgage contracts rose 12 basis points to 6.97% in the week ending September 11, the highest since May 2025.

In February of this year, the interest rate fell to its lowest level since 2022, just before the war in Iran broke out. Interest rates have risen sharply since then, partly because rising energy prices have heightened concerns about inflation.

Continued rise in borrowing costs has dampened demand for loans. The MBA Home Buying Index — a measure of loan applications — fell slightly by 0.8% from the previous week; the refinancing index fell 8.8% to its lowest level since May 2025.

On Wednesday, the market expected the Federal Reserve to raise interest rates for the first time since 2023 to curb inflation. The Federal Reserve's decision will not directly affect mortgage interest rates, but it could trigger a ripple effect in the bond market. Mortgage interest rates are closely linked to 10-year US Treasury yields, which this week rose to their highest level in nearly two decades.

The MBA survey has been conducted weekly since 1990, and the respondents included mortgage banks, commercial banks, and savings institutions. The data covers more than 75% of all retail residential mortgage applications in the US.

Federal Reserve Chairman Kevin Walsh gave a clear standard at the annual meeting of global central banks in Jackson Hole on August 28: we must be confident that potential inflation is clear and fast enough to get close to the target; otherwise, the committee still has work to do.

At the same time, he pointed out that there are almost no signs of policy restrictions in the credit and loan markets. This statement rephrased the market's policy response function from “whether the year-on-year decline” to “whether the trend is fast enough and whether financial conditions are really tight.”

The US consumer price index rose 0.4% month-on-month and 3.4% in August; the core index excluding food and energy rose 0.3% month-on-month, and the increase in core CPI exceeded market expectations. The energy segment rose 2.1% month-on-month, the energy sector was still above 16% year over year, and the housing segment was 3.0% year over year, indicating that the sticky project did not give clear confirmation of cooling.

In an environment of high interest rates, the US real estate market continues the “volume reduction” pattern. Zillow economists previously predicted a 4.3% increase in housing sales for the full year of 2026, but now it is adjusted to increase by 1.3% for the full year. Among them, the fourth quarter is expected to shrink by 3.5%.

NAR chief economist Lawrence Yun pointed out that although the high interest rate environment naturally inhibits desire to buy a house, cumulative sales in the first eight months of this year still recorded a 1.6% increase, and property prices continued to reach new highs. The median sales price of existing homes rose to US$446,600 in June, up 1.8% year over year, setting a record high.