Mortgage rates have climbed above 7% for the first time in over two years, according to the Mortgage Bankers Association (MBA). As of the week ending September 18, the 30-year fixed-rate mortgage averaged 7.12%, the highest since May 2024. This increase comes as home prices remain near record highs, making it more expensive for potential buyers to enter the market. With fixed-rate mortgages becoming more costly, more homebuyers are turning to adjustable-rate mortgages (ARMs), which offer lower initial interest rates. Mike Fratantoni, a senior vice president and chief economist at the MBA, explained that 5/1 ARMs—those with a fixed rate for the first five years before adjusting annually—were about 1% lower than fixed-rate mortgages. This makes ARMs an attractive option for buyers who plan to stay in a home for a shorter period or expect their income to increase over time. Freddie Mac, another major mortgage data provider, will release its own mortgage rate report on Thursday. As of September 17, its data showed the 30-year fixed-rate mortgage at 6.95%. These rates often move in line with the 10-year Treasury yield, which has risen sharply in recent weeks. Investors are concerned about inflation, government debt, and the overall cost of borrowing, which has pushed the yield above 5%. The Federal Reserve raised interest rates by a quarter-point last week, a move that some lenders had already anticipated. Jake Krimmel, a senior economist at Realtor.com, noted that the 10-year Treasury yield has increased by more than a percentage point since late February, when tensions escalated in the Middle East. The housing market typically slows at the end of summer, but higher mortgage rates could further reduce buyer activity as borrowing costs rise. Experts suggest that the combination of affordability challenges and rate volatility could slow the growth of new mortgage lending, especially if high rates persist. Richard Shane, a researcher at J.P. Morgan, highlighted in a July report that continued high rates might lead to a decline in home purchases and mortgage originations, as potential buyers face tougher financial hurdles.