Mortgage Rates Are Still Going Up—Here’s Why

Mortgage rates again hit the 7 percent mark this week, according to a new Redfin report, rising to the highest level since the beginning of the summer, despite the Federal Reserve cutting its key interest rate by half a percentage point in September and the prospect of further reductions.
It was the first and biggest rate cut since March 2020, and it was expected to represent a dramatic shift for homebuyers after years of high mortgage rates, especially as the central bank signaled that more reductions will probably follow in 2025 and 2026.
And yet, daily average mortgage rates have climbed by nearly a whole percentage point in the past six weeks, further harming homebuyers at a time when housing affordability is a key issue in the upcoming election.
A homebuyer on a $3,000 monthly budget has lost $33,250 in purchasing power over the past six weeks, Redfin estimated. On September 17, they could have bought a home for $475,750 with the 6.11 percent average rate at the time; on Monday, they would have only been able to afford a $442,500 home with a 7 percent mortgage rate.
Experts think that this unexpected rise in mortgage rates is linked to the continuous strength of the U.S. economy.
“Mortgage rates are influenced by the yield on the 10-year bond. Since September, the yield has risen from 3.68 percent to over 4.33 percent today,” Melissa Cohn, regional vice president at William Raveis Mortgage, told Newsweek.
“Mortgage rates have risen with the higher bond yields. Bond yields are higher in great part due to the ongoing strength of the economy, which has been seen with strong job creation and consumer spending,” she added. “This stronger-than-expected data has dampened hopes for future rate cuts and has also kept yields and rates higher.”
The election next week has also added to the volatility of the market, Cohn said, and higher yields.
“A Donald Trump win will push rates even higher with his plan for high tariffs on foreign imports,” she said, adding that it appears that markets are already factoring in a possible Trump victory on November 5.
Mark Zandi, chief economist at Moody’s Analytics, explained the rise in mortgage rates as both a reflection of the stronger-than-anticipated U.S. economy and investors’ expectations of the results of the election.
“Investors are taking Trump at his word and believe if he wins it will lead to higher tariffs, immigrant deportations, and deficit-financed tax cuts in a full employment economy, all of which means higher inflation and more government borrowing,” Zandi wrote on X on Tuesday. “The recent surge in mortgage rates is a clear indication [of] what investors believe a Trump victory would mean for the economy and the nation’s fiscal outlook.”
Trump has vowed to impose tariffs on every import coming into the U.S., including a potential 60 percent tariff on goods from China. He has also floated plans for deporting immigrants as a solution to lower housing costs for Americans and eliminating taxes on tips and Social Security benefits, as well as cutting the corporate tax rate significantly.
While investors’ expectations on the economy based on Trump’s agenda are what’s partially driving mortgage rates up, the rise in the fixed mortgage rate could help the Republican candidate win the election.
According to Redfin’s calculations, homebuyers in all seven swing states—Arizona, Georgia, Michigan, North Carolina, Nevada, Pennsylvania and Wisconsin—lost some purchasing power between September 17 and October 28.
Cohn said mortgage rates are likely to remain high until the election is over “and there is economic data that shows signs of strain in the economy. 2025 is probably my best guess,” she added.