How latest mortgage rates could affect Long Islanders' housing payments

The average long-term U.S. mortgage rate rose this week to its highest level since June 2025, increasing the already steep cost to buy a home on Long Island.

The 30-year fixed rate rose to 6.76% on average through the week ended Thursday, according to mortgage giant Freddie Mac, increasing from 6.71% a week earlier. The average was 6.35% at this time last year.

After dipping slightly below 6% in late February, interest rates on home loans have risen more than 0.75 percentage points following the start of the war with Iran.

Mortgage rates tend to move in tandem with the yield on 10-year Treasury notes, which rose this week to its highest point since 2023. Mortgage rates are influenced by a combination of factors, according to Bankrate, including inflation expectations, with rates tending to rise when investors expect increases in consumer prices.

"The conflict in Iran continues to keep oil prices and inflation expectations elevated, pushing Treasury yields toward their highest levels in more than a year," Anthony Smith, a senior economist at Realtor.com, wrote in an analysis of the mortgage market Thursday.

Friday's release of new data on the pace of inflation as well as the Federal Reserve's announcement next week on its benchmark interest rate will influence the future direction of mortgage rates, Smith wrote.

As rates rise, so do the monthly payments needed to purchase a home. The monthly payment for a $500,000 mortgage has increased by $255 or 8.5% since February, according to a Newsday analysis using Bankrate's mortgage calculator.

A borrower seeking a $500,000 mortgage would pay $3,246 a month toward principal and interest at this week's average rate, up from $2,991 in late February when the average rate bottomed out at 5.98%. That excludes the cost of taxes and insurance.

A 6.76% rate on a $500,000 mortgage would mean a 

$3,246 payment

toward the principal and interest. That's up from

$2,991 in February

based on the 5.98% rate at the time

But Long Island mortgage lenders said higher borrowing costs haven't cooled demand for home purchases.

Homebuyer inquiries have been steady at NMBNow, a Melville-based lender, said chief operating officer Mary O'Sullivan.

Long Island has been an anomaly compared with other parts of the United States because the shortage of available homes has persisted, while other areas have seen inventories rise.

"The market's been a bit volatile and obviously interest rates are not in our favor," O'Sullivan said. "It has not seemed to have slowed down the desire from clients to be going to open houses and for people to be wanting to go into contract."

Mortgage rates had yet to stifle the Long Island housing market through the end of July. The median price of a single-family Suffolk County home matched an all-time high of $750,000 in July, and Nassau's median was just under the record level, at $880,000.

On the Island, about 5% more deals closed in July compared with that same month in 2025, according to the latest data from OneKey MLS. That has bucked the national trend of declining deals, which continued in August, the National Association of Realtors reported Thursday.

Existing-home sales nationwide fell 1.2% year over year to their slowest annualized pace since June 2025.

Zahra Jafri, president of Lynx Mortgage Bank in Westbury, said while some rate-sensitive first-time buyers will be priced out, there are still too many buyers chasing too few available houses on Long Island for the market to soften.

She said buyers won't be alarmed by rates between 6.5% and 7%.

"The people that have come into the market over the last 12 months have come in with the mindset that rates are in the high 6s, so I think they're still prepared for that," Jafri said.

Other industry data suggests more borrowers could soon face rates of 7% or higher. Mortgage News Daily, which uses proprietary lender data to publish daily rate information, reported its 30-year rate index surged to 7.07% on Thursday.

The mortgage rate an individual borrower can secure is highly dependent on their own finances. Lenders use a borrower's debt-to-income ratio, credit score and down payment size relative to the cost of the home when offering rates, O'Sullivan said.

Long Island's prolonged inventory shortage is tied to a wide gap between existing homeowners' current mortgage rates and the borrowing costs they would need to take on to buy a new house, said Kieran Rodgers, a real estate agent at The Agency in Huntington.

As rates rise, that gap is getting wider.

"The problem is these potential future sellers are not looking to sell because they don't want to lose their 2.75%" rate, he said.