Mortgage rates are inching closer to 7%.

According to Freddie Mac, 30-year fixed rates averaged 6.95% this week, up from 6.76% last week and the highest since January of 2025, which was also the last month in which mortgage rates hit 7%. The jump in rates follows a surge in 10-year Treasury yields, which reached 5% this week before ticking back down as bond investors fretted over stubborn inflation and surging government deficits.

On Wednesday, the Federal Reserve raised the federal funds rate for the first time in three years and signaled that another hike was likely before the end of the year. The move had little decisive impact on the bond market, largely because investors had already expected a hike. But on Thursday morning, yields were falling, which some analysts attributed to lower oil prices.

The milestone of 7% mortgage rates itself doesn't cause any automatic shock to the housing market, but it is likely to spook buyers who are already wary of sky-high home prices and an uncertain economy that features persistent inflation and a middling job market.

Economists expect that mortgage rates are likely to remain elevated for the foreseeable future and that home buyers will continue to face competition for debt from governments around the world and artificial-intelligence companies, both of whom are issuing huge amounts of debt to fund spending needs.