U.S. Mortgage Rates Hit Two-Year High Amid Inflation

U.S. mortgage rates have climbed to a two-year high, with the average 30-year fixed rate reaching between 7.28% and 7.6% as of October 1, 2026. This trend marks the sixth consecutive weekly increase and the highest level since November 2023. The surge is driven by a sell-off in U.S. Treasury bonds, pushing the 10-year yield to 5.34%, fueled by inflation and rising energy prices linked to conflicts in Ukraine and military actions by the United States and Israel against Iran.

Donald Trump is considering a ban on U.S. diesel exports to combat rising costs, though cabinet members have warned such a move could further increase prices. The administration is also urging France and Germany to release emergency diesel stockpiles. Meanwhile, the Federal Reserve System faces pressure to hike rates in December as super core inflation remains sticky.

The rate hikes have suppressed housing demand. The Mortgage Bankers Association reported a 6% drop in weekly mortgage applications, with refinance demand falling 9% and purchase applications decreasing 4%. To manage affordability, borrowers are increasingly shifting toward adjustable-rate mortgages, which now account for 10.3% of applications, the highest share since October 2025. Despite the rate environment, home prices continue to rise, with the S&P CoreLogic Case-Shiller index reporting a 1.9% national increase in July compared to the previous year.