US mortgage rates have climbed to their highest level in more than two years, adding further pressure to a housing market already constrained by elevated home prices and sluggish sales activity.

Data released on Wednesday by the Mortgage Bankers Association (MBA) showed the contract interest rate for a 30-year fixed-rate mortgage rose 15 basis points to 7.12% for the week ending September 18. This marks the highest reading since May 2024. In contrast, the rate for a mortgage fixed for the first five years and adjustable thereafter declined 13 basis points to 6.1%.

As borrowing costs have climbed, the number of mortgage applications in the US has diminished. The MBA's purchase loan application index fell 0.8% to a four-week low, while the refinance index dropped 2.6% to its lowest level since February 2025.

Crossing the 7% threshold could further dampen demand. "The significance of 7% is purely psychological, as the perception of rates entering the high sevens can have a notable impact," said Daryl Fairweather, chief economist at Redfin.

Fairweather projects that higher rates will continue to moderate home price appreciation, though sales activity is expected to remain weak. "The housing market has clearly been in a downturn, but perhaps not severe or prolonged enough to drag the broader economy into another recession," said Ben Ayers, senior economist at Nationwide.

Borrowing costs are likely to stay elevated. Mortgage rates track closely with the 10-year Treasury yield, which is currently hovering near its highest level in roughly two decades. Nationwide anticipates that mortgage rates will remain near 7% at least through the end of this year.

Even so, there may be limited room for further deterioration in the housing market. "We are quite close to the bottom now," said Hannah Jones, senior economist at Realtor.com. "Reaching the number 7 will certainly have a psychological effect, but we do not anticipate a cliff-like drop in demand."

Jones noted that while people are not relocating for opportunistic reasons at present, life events such as marriage, divorce, and job changes will continue to underpin housing market activity.

The MBA's survey has been conducted weekly since 1990, covering mortgage bankers, commercial banks, and thrift institutions. The data represents more than 75% of all retail residential mortgage applications in the US.