Nocturnal 
Mortgage rates have crossed the psychologically important 7% mark in the United States, and the ripple effects are being felt on this side of the Atlantic too.
According to Freddie Mac’s latest Primary Mortgage Market Survey, the average US 30-year fixed-rate mortgage climbed to 7.03% this week, up from 6.95% the week before and 6.30% a year ago. That’s the highest level since May 2024, according to Mortgage Bankers Association President and CEO Bob Broeksmit.
The rise has been driven largely by fallout from the war in Iran, which has knocked confidence in the global economy, as first reported by The New York Times. Freddie Mac’s chief economist, Sam Khater, said the market “remains supported by a solid labor market and an economy that is growing at a healthy rate,” but the direction of travel is clear: last week’s 6.95% average was already a full percentage point higher than when the conflict began back in February.
The US Federal Reserve added to the pressure by raising interest rates by a quarter point last week. Fed Governor Michael S. Barr said the central bank had been “out of position” given changes in the economy, and warned “further policy adjustments are likely to be needed” to bring inflation back under control.
Why it matters for buyers
A jump in rates might sound small on paper, but it adds hundreds of dollars a month to a typical mortgage bill. In the US, purchase applications have already fallen and mortgage applications reportedly dropped 19% in a week, according to industry reporting. The median age of a first-time buyer has climbed to 40.
Realtor.com senior economist Anthony Smith said the rate rise lands “in the midst of a slowdown” as the market heads into its traditionally quieter autumn and winter period, and warned it will “add to the headwinds” facing home sales.
The UK picture is turning too
Britain isn’t immune. Figures from Moneyfacts show the average five-year fixed mortgage rate has risen to 5.92%, the highest since mid-October 2023 – shortly after the fallout from the infamous mini-Budget. The average two-year fixed deal has hit 5.88%, its highest point since April.
Big lenders including NatWest, Santander, HSBC, Lloyds Bank and TSB have hiked selected fixed rates twice since the start of September, according to Moneyfacts data reported by The Negotiator. Rachel Springall, finance expert at Moneyfacts, said the increases show that “fixed mortgage rates are not intrinsically linked to adjustments to the Bank of England Bank Rate,” which currently stands at 3.75%.
She added that borrowers coming off a two-year fixed deal now typically pay around £150 a month more than they would have done at the start of this year.
Springall told Moneyfacts that anyone approaching the end of a fixed deal “must seek advice” given how volatile the market remains. UK Finance figures show around 1.8 million fixed mortgage deals are due to end this year, up from 1.6 million last year, and brokers say customers are getting in touch up to six or seven months before their current deal expires because they’re “worried about payment shock.”
What happens next
The Bank of England is expected to hold rates when it meets this week, though further hikes have not been ruled out in the months ahead. In the US, forecasters aren’t predicting an imminent drop in rates either, with tariffs, a housing shortage and a cautious Fed all keeping pressure on the market.
For now, both sides of the Atlantic are bracing for a slower, pricier housing market heading into the winter.
