U.S. mortgage rates climbed to their highest level in more than a year last week, adding pressure to an already strained housing market as rising Treasury yields pushed borrowing costs higher and sharply reduced refinancing activity.
The average contract rate on a 30-year fixed mortgage rose six basis points to 6.85% in the week ended September 4, according to the Mortgage Bankers Association. The rate was last higher in June 2025.
The increase extends a sharp rise in residential borrowing costs this year as mortgage rates respond to higher yields in the U.S. government bond market.
Higher Treasury Yields Push Up Borrowing Costs
Mortgage rates closely track movements in U.S. Treasury yields, particularly the benchmark 10-year yield.
Treasury yields have risen amid concerns that the U.S.-Iran conflict and higher oil prices could intensify inflationary pressures. Investors are also weighing the expanding U.S. federal debt, which surpassed $40 trillion in August, and increased competition for capital as technology companies finance large-scale artificial-intelligence infrastructure.
The 10-year Treasury yield approached 4.8% on Tuesday, near its highest level since October 2023.
Mortgage rates are now roughly 80 basis points higher than around the time U.S. and Israeli strikes against Iran began in late February, illustrating how geopolitical and inflation concerns have moved through bond markets into household borrowing costs.
Mortgage Applications Fall 2.7%
Higher rates continued to weigh on mortgage demand.
The MBA’s Market Composite Index, which measures overall mortgage application volume, fell 2.7% from the previous week to 240.6, reversing the prior week’s 0.8% increase.
Refinancing activity was hit particularly hard. The Refinance Index dropped 6.2%, reaching its slowest weekly pace since May 2025, while purchase applications edged down 0.2%.
The previous week, the average 30-year contract rate had stood at 6.79%, while total applications increased 0.8%.
Inflation Data Comes Into Focus
The increase in mortgage rates comes just ahead of two closely watched U.S. inflation reports.
Producer-price data are scheduled for Thursday, followed by consumer-price inflation on Friday. The readings will provide the Federal Reserve with its final major inflation data before its September 15-16 policy meeting.
Higher Treasury yields have already translated into more expensive residential financing, while the latest MBA figures show the clearest impact in refinancing demand. With the 30-year rate at a 14-month high, movements in inflation expectations and government bond yields remain important factors influencing borrowing costs across the U.S. housing market.
