US mortgage rates have soared to their highest level in nearly three years, with the sharp rise in borrowing costs adding to pressure on the housing market as Americans head towards November 3 elections.The average rate for a 30-year fixed-rate mortgage rose 19 basis points to 7.49% in the week ended October 2, the Mortgage Bankers Association (MBA) said, as cited by Reuters. This spike pushed rates to the highest level since November 2023, hitting demand for home loans.Mortgage applications dropped 4.2% last week from the previous week, while refinancing applications fell sharply. Overall application volumes are now at their lowest since February 2025 and have declined nearly 50% since January.“Very few homeowners have an incentive to refinance at these rates, and the jump in borrowing costs has caused many potential borrowers to step back from the purchase market,” Joel Kan, the MBA’s deputy chief economist told Reuters.Mortgage rates have closely followed movements in the yield on 10-year US treasury notes. Earlier this week, the yield topped 5.3%, reaching a 24-year high, with concerns over inflationary pressures from soaring oil prices and data showing stronger US economic growth driving the rise.Home borrowing rates are up about 1.4 percentage points since joint US-Israeli strikes against Iran began in late February, tracking a similar increase in the 10-year treasury yield.The increase comes at a politically sensitive time, with the US mid-term elections just four weeks away. The cost of living was the top issue among Americans in deciding how they would vote, according to a Reuters/Ipsos poll completed on Monday. At the same time, US President Donald Trump’s approval rating stood at a record low of 32%.Inflation has also risen, reaching 3.4% in August on a measure targeted by the Federal Reserve at 2%.Fed policymakers have signalled that they expect another interest-rate increase by the end of the year following the rate hike in September. Markets are currently betting that policymakers will not raise rates at the next meeting at the end of October.The latest increase in mortgage rates comes as affordability remains under pressure for buyers, while the decline in loan applications points to weaker activity in the mortgage market.
