Mortgage rates today top 7% for first time since January 2025

The average long-term mortgage rate rose above 7% this week for the first time since January 2025, increasing the cost to buy a home on Long Island at a time when prices are already at record highs.

The 30-year fixed rate averaged 7.03% through the week ending Thursday, according to the latest data from mortgage giant Freddie Mac.

That represented a slight uptick from 6.95% last week and was well above the 6.3% average reported last year at this time.

The increase over the past year translates to an extra $242 a month in principal and interest on a $500,000 mortgage. A borrower with that loan at this week's average of 7.03% would pay $3,337 a month before taxes and insurance, up from $3,095 a month at the average rate a year ago, according to a Newsday analysis using Bankrate's mortgage calculator.

Another closely watched gauge, published by Mortgage News Daily, reported the average 30-year fixed rate at 7.45% on Thursday afternoon.

Rates have been moving in the wrong direction for more than a month, but crossing 7% carries extra weight in consumers' minds, said Greg Parmiter, chief business development officer at Reliant Home Funding in Melville. 

"I definitely think it's a significant milestone for borrowers" he said. "The general public do look at those fat round numbers and take them to heart."

He said Reliant hasn't seen clients drop out of the market yet because of higher rates, but the industry as a whole is seeing fewer loan applications.

The Mortgage Bankers Association reported on Wednesday its index tracking purchase applications fell 11% for the week ending Sept. 18 compared with a year ago.

Still, Parmiter doesn't expect a major effect on Long Island home prices because he expects the shortage of available homes to have a greater effect on pricing than the higher cost of a mortgage. 

"While higher rates have affected affordability, they have not created the kind of dramatic price declines or market shifts specifically on Long Island that some buyers have been waiting for," he said. 

The median sale price for a single-family home was a record $911,000 in Nassau County last month and a record $760,000 in Suffolk County, according to OneKey MLS.

Mortgage rates often move in tandem with the yield on 10-year Treasury bonds, which this week rose above 5.1% for the first time since July 2007.

 Yields have climbed steadily since the start of the Iran war, which has driven up energy prices and contributed to faster than expected inflation, Newsday previously reported.

Bond yields climbed this week on news that U.S. business activity rose at its fastest pace in five years, Bloomberg reported. 

Given the ongoing nature of the Iran war and its effect on oil prices, it's hard to know when mortgage rates will have reached a peak, Parmiter said. 

"There's certainly room to go higher," he said.

Rising mortgage rates have previously been insufficient to halt price growth. Home prices on Long Island kept rising in late 2023 even as rates approached 8% — their highest level in more than 20 years. A major factor has been homeowners' reluctance to sell and trade in a 3% rate for one around 7%, said Jeff Ostrowski, a housing analyst at Bankrate

"There was this thought that 3% mortgage rates were really fueling the housing boom, and as rates jumped as high as 8%, that was really going to slow down home price appreciation or maybe even cause prices to correct," he said. "That's not what happened. Mortgage rates have been elevated for a few years now, but home prices just keep setting one record after another."

Ostrowski advises homebuyers who are shopping this fall to get quotes from multiple lenders. 

"When rates are going up sharply like they have been for the past few weeks, it becomes more important than ever to shop around because there can be even wider variation from one lender to the next," he said. 

For borrowers, the best strategy might be preparation. 

A borrower planning to purchase within three months should prepare as if mortgage rates could rise by half of a percentage point while they looked for a house. That would ensure they could still qualify in 80% of scenarios, according to a Realtor.com analysis of mortgage rate changes since 2000. 

Rising mortgage rates are adding an additional challenge for buyers at a time when sales of existing homes have already been falling nationwide, Realtor.com senior economist Anthony Smith wrote in commentary on the mortgage market published Thursday.

"This will continue to add to the headwinds in place for home sales," he wrote. 

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.