US mortgage rates have climbed to their highest level in more than a year and a half, intensifying the home affordability crisis for American households and adding political pressure as election season heats up.

On Thursday, data from Freddie Mac showed the average rate on a 30-year fixed mortgage rose to 7.03%, touching that level for the first time since January 2025.

The 7% threshold is setting off a chain reaction among buyers, sellers and builders. Combined with weak existing-home sales and housing starts figures released this summer, economists warn that the outlook for a US housing market already stuck in a four-year sales slump is growing dimmer.

Anthony Smith, senior economist at Realtor.com, said:

For both buyers and sellers, the highest mortgage rate in over a year and a half is landing on a market that is already in a slowdown cycle. The 7% level is more of a psychological blow than a mathematical one, and it has arrived right at the seasonal moment when buyers would normally have the upper hand in negotiations.

Rate breach of psychological mark deepens housing market strain

Seven percent carries no specific economic significance as a threshold, but its psychological impact should not be underestimated.

Before 2022, mortgage rates had not touched 7% since 2001. Over the more than two decades that followed, Americans grew accustomed to rates in the 3% to 4% range. During the pandemic, some buyers even secured mortgages at rates below 3%.

After rates spiked abruptly in 2022, the housing market stalled, with many buyers choosing to wait on the sidelines in hopes that rates would fall back to historic lows. Four years later, rates have remained stubbornly high.

In February, mortgage rates briefly dipped below 6% for the first time since 2022, igniting buying enthusiasm and fueling broad expectations that the market would recover during the spring selling season.

But after the Iran conflict erupted, rising oil prices and global trade disruptions pushed rates higher, causing the long-awaited spring peak season to fizzle out.

Since then, as rates have continued to climb, existing-home sales have kept sliding. Economists say some buyers who were forced to act due to life changes 鈥?such as a job relocation or a new baby 鈥?did drive some improvement in the market, but overall the housing sector is still waiting for a recovery that has yet to arrive.

Brad Case, chief residential economist at Homes.com, noted that with inflation and economic uncertainty persistently high, the likelihood of a sharp near-term decline in rates is limited, and a growing number of buyers and sellers are being forced to accept that reality.

Meanwhile, the 15-year fixed mortgage rate also rose to 6.42% on Thursday, the highest level since May 2024.

Seller lock-in effect may resurface

Over the past few years, a large number of homeowners refused to sell because they were unwilling to give up their low-rate mortgages, leaving housing inventory persistently scarce.

As some sellers came to realize that rates were unlikely to fall in the near term, that "lock-in effect" had begun to loosen somewhat. In August, the number of existing homes available for sale in the US rose to 1.62 million, the highest level since 2019.

However, breaking through the 7% threshold could undo that progress. Sellers are not only still reluctant to trade a 3% mortgage for a new loan at 7%, but they also know full well that in a market where buyer purchasing power is constrained, they may have to cut their asking prices to attract offers.

Economists expect more homeowners will choose to stay put and renovate their existing homes rather than sell and trade up.

Builder profit margins come under further pressure

The high-rate environment is also delivering multiple blows to residential developers. With construction material and labor costs continuing to rise and profit margins already eroded, builders have widely adopted rate buydown strategies to stimulate sales.

Further increases in mortgage rates will make those incentives more costly, directly weighing on builder profitability and dampening their willingness to expand capacity.

Housing affordability is one of the core policy issues for the Trump administration. The White House has directed government-backed mortgage giants Freddie Mac and Fannie Mae to purchase mortgage-backed securities to push borrowing costs lower, and has rolled out measures to restrict investors from buying single-family homes.

However, according to calculations by the Financial Times based on Zillow data, since Trump took office, home prices across the US have risen 0.5% cumulatively, while monthly rents have climbed 4.8%.

With the November midterm elections approaching and Republicans striving to maintain control of both the Senate and the House, the reality of high housing costs is continuing to test voter sentiment.