Mortgage rates surged to the highest level since November 2023, further straining a U.S. housing market already hampered by high borrowing costs.

The average for a 30-year, fixed loan jumped 25 basis points from a week earlier to 7.28%, Freddie Mac said in a statement Thursday. The weekly increase was the biggest since October 2022. A year ago, the rate was 6.34%.

Rates above 7% are weighing heavily on demand in a market already hobbled by home prices that remain close to record highs. The combination is putting homeownership out of reach for many would-be buyers and downsizers alike.

“We’re moving into territory we haven’t seen in a bunch of years,” said Brad Case, chief economist at Homes.com. “It’s a psychological question: How are buyers going to react? Are they going to get comfortable with a seven-and-a-quarter interest rate or are they going to pull back?”

Higher mortgage rates have been pushing more home sellers to reduce prices. Pending sales fell 4.1% in September from a year earlier, while the share of listings with price cuts increased to its highest September level since 2018, according to Realtor.com.

“More homes are available than there were a year ago,” said Jake Krimmel, senior economist at Realtor.com. “But the source of that improvement matters. It is arriving as demand cools in response to higher borrowing costs, not because a new wave of sellers is rushing into the market.”

As always, real estate is local. In the hottest markets, particularly parts of the Northeast and Midwest, listings are scarce enough that sellers retain the upper hand. But in builder-heavy markets like Houston and Denver, buyers are getting hard to come by.

“We will see a lot of variation across local markets and segments of the market, said Bright MLS Chief Economist Lisa Sturtevant. “Buyers who are more rate-sensitive, including first-time and moderate-income buyers, will stay out of, or exit the market in greater numbers than higher-income buyers.”

That could push prices lower for entry-level and mid-tier homes, even as the luxury end of the market holds firm, she said.

The pullback is also showing up in mortgage applications. Mortgage Bankers Association reported this week that its purchase index, which measures loan applications, fell 4.3% to the lowest level since April 2025. The group’s refinance gauge tumbled another 8.7%, extending a skid dating back to mid-August.

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