Mortgage rates posted their largest increase in four years this week, one of the clearest signs of how the recent bond-market selloff is spilling into the broader economy.

Rates for 30-year fixed-rate mortgages leapt to 7.28% from 7.03%, the biggest jump since October of 2022, according to Freddie Mac.

Mortgage rates are rising as inflation, a surge in government debt and heavy corporate borrowing for the build-out of AI push up bond yields, which move in the opposite direction of bond prices. The bond-market selloff is raising borrowing costs for home buyers and dealing blow after blow to a limping housing market.

"Showings have stopped basically," said Don Wessel, a real-estate agent in Greenville, S.C. "I've got good listings in downtown Greenville, which is one of the hottest areas, and nobody's looking at them."

In 2022, rates surged as part of postpandemic inflation that ended years of below 5% mortgage rates and ground the housing market to a halt. Home sales still haven't recovered from that rapid freeze four years ago. With rates now at their highest point since 2023, buyers are likely to stay planted on the sidelines, while sellers may take their homes off the market.

For the week ending Sept. 25, mortgage applications fell 6%, the fourth consecutive week of declines, according to the Mortgage Bankers Association.

At the start of the year, mortgage rates touched below 6%, but the beginning of the war in Iran caused them to jump. As the conflict has drawn on, fears of sticky inflation have driven rates higher and higher. Rates began September at 6.71% before a historic bond selloff sent them surging.

Americans feel the pain of a bond selloff most directly and rapidly through the housing market, where mortgage rates closely follow the 10-year Treasury yield, which today hit its highest point in more than 20 years.

The recent run-up in mortgage rates has brought sales activity in the housing market to a standstill. Buyers are already coping with record home prices and stretching to afford down payments. Plus, with sky-high homeowners association fees and property taxes, the math has become challenging for first-time buyers to work out.

Now, the end of 2026, a year that was expected to launch the market's recovery, is likely to be a slog.

"I still see it declining and you're coming into the slow part with the holidays," Wessel said. "I think there's a short window now for sellers to sell and then buyers get out of the market."

Buyers in the upper end of the market, less constrained by affordability, are continuing to show interest, said Anthony Rael, an agent in Denver. "They seem to be flush with cash, bringing 20%, 30% down payments into the mix," he said. "Whereas the lower market, let's just say closer to a half a million and below, is really struggling where we're getting lots of showings and no activity, no offers."

Higher mortgage rates could also halt progress the market has made in freeing up inventory. For years, homeowners have been wary of selling their homes to preserve their low mortgage rates from years ago. That sent inventory plummeting, which has allowed home prices to continue hitting new records, despite weak demand.

There have been signs that the lock-in effect was starting to ease as sellers lost patience and gave up their low rates to move for family reasons or new jobs. In August, inventory approached prepandemic levels.

But now, rates well above 7% could drive sellers away.

In July, Adam Wharton and his wife bought a new house in Georgia but haven't been able to sell their old house, which they listed at the beginning of September. There initially was a flurry of interest, and they accepted an offer, before the buyer backed out.

"We were getting multiple showings a day. Within four days, we had a full-ask offer on it," he said.

But then after rates jumped, the buyers disappeared. Their last showing was two weeks ago. "Since that, it's been nothing, no scheduled showings, no offers, no nothing from people who have looked at it before," he said.

The mortgage they have on the house, with a rate of 3.35% and a monthly payment under $1,000, is extremely cheap, and so Wharton isn't in any rush to sell. Now, they are considering taking it off the market and renting it out if they don't get any offers, waiting for the market to loosen up before listing it again.

"Everybody has in their minds these two and three and four percent mortgages," he said.