The 30-year fixed-rate US mortgage jumped to 7.28% on October 1, its biggest one-week rise in four years, as a bond-market sell-off and a weakening housing sector collide with looming midterm elections. Homebuilders KB Home and Lennar both reported falling revenue as buyers pull back.
US mortgage rates posted their sharpest weekly jump in four years, piling fresh pressure on a housing market already strained by high borrowing costs. The 30-year fixed-rate mortgage averaged 7.28% as of October 1, up 0.25 percentage points from a week earlier, according to Freddie Mac.
That quarter-point move was the biggest since October 2022, coming weeks after the Federal Reserve lifted interest rates by 0.75 percentage points to tame the highest inflation in more than four decades. As a result, mortgage rates now sit at their highest level since late 2023, driven by expectations that the central bank will need to keep raising rates to contain inflation worsened by Donald Trump's Iran war and a surge in AI-related spending.
Rates climb as midterms approach
The increase lands weeks before midterm elections that will decide which party controls Congress, at a time when polls show Americans are increasingly worried about the rising cost of living. The 30-year rate had dipped below 6% in late February, its first time there since September 2022, just days before the US and Israel struck Iran. It has climbed since, as disruptions to Middle East commodity exports pushed up inflation worldwide.
Meanwhile, the latest rise accompanies a sell-off in US government bonds, which left Treasuries with their worst monthly performance in four years during September. Buyers also face record-high house prices alongside the higher borrowing costs, according to the Case-Shiller home price index, and homebuilder sentiment has weakened further amid soft demand and high construction costs.
Homebuilders report falling sales
KB Home, one of the largest US homebuilders, last week reported a 20% year-on-year drop in third-quarter revenue and a 19% decline in homes delivered, acknowledging that market conditions had weakened since June. Lennar Corporation, the second-largest homebuilder by volume, last month likewise pinned year-on-year declines in third-quarter revenue, new orders, and adjusted earnings on deteriorating buyer affordability.
Trump has made housing affordability central to his presidency, introducing measures including a clampdown on investors buying up single-family housing. The cost of living remains a major concern for Republicans as they work to keep control of the Senate and Congress in the coming midterms.
Source: Financial Times
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