May 27 - The average rate on the most widely used U.S. home loan climbed to a nine-month high in the week ended May 22, the Mortgage Bankers Association said, as global energy tensions and higher inflation pushed benchmark Treasury yields and borrowing costs upward.
The MBA reported that the average 30-year fixed-rate mortgage rose 9 basis points to 6.65% over the cited week. That level had not been exceeded since August 2025, prior to the Federal Reserve's string of rate reductions aimed at preventing further weakening in the labor market.
The trajectory of rates has coincided with a broader economic picture in which the U.S. labor market has steadied and inflation has moved higher. The unemployment rate stands at 4.3%, the same reading it held last August. Over the same period, consumer prices have accelerated, with inflation running at 3.8% in April on a year-over-year basis compared with 2.9% in August.
Those data points have prompted concern among a growing number of Federal Reserve policymakers that the pickup in inflation may not be solely the result of transient energy-price moves and might require a policy response. The MBA data showed mortgage applications fell 8.5% from the prior week, a drop largely driven by a decline in refinancing activity.
The recent uptick in mortgage rates also came as Kevin Warsh assumed the role of Federal Reserve chair, succeeding Jerome Powell. President Donald Trump, who had criticized Powell for keeping rates high, said hours after Warsh's swearing-in ceremony that he expected rates to fall. Financial markets, however, are pricing in the possibility of a Fed rate hike before the end of the year.
Mortgage rates tend to track the Fed's short-term policy rate loosely, but their movement is more closely aligned with the 10-year Treasury yield. In the days following the MBA's report, yields on U.S. government bonds eased on hopes of a breakthrough agreement to reopen the Strait of Hormuz, which had exerted upward pressure on crude prices and inflation expectations.
Overall, the combination of elevated oil prices linked to the Iran war, a rebound in consumer inflation, and changing expectations for monetary policy has pushed the average 30-year fixed mortgage rate to its highest reading since the pre-cut peak in August 2025, while prompting a meaningful pullback in applications for mortgage credit.
Sectors affected: housing, consumer credit, fixed-income markets.