Mortgage Rates Climb to 3-Year High as Fed Official Calls for More Hikes

The average rate on a 30-year fixed mortgage climbed to 7.4% for the week ending October 8, up 12 basis points from the previous week. It is the highest level in three years, and it puts home loans at a cost that many buyers have not seen since the earlier years of the decade.

The move came shortly after a Federal Reserve official said additional interest rate increases may be necessary to bring inflation under control. Mortgage rates do not follow the Fed's benchmark rate directly, but they tend to move in the same direction when markets expect borrowing costs to stay high for longer.

For buyers, the change adds up quickly. On a $400,000 loan, a 7.4% rate works out to a monthly principal and interest payment of roughly $2,770. That is about $30 more per month than the same loan would have cost at the prior week's rate.

Higher rates also make refinancing less attractive for homeowners who locked in lower rates in recent years, which can keep existing owners in place and limit the number of homes coming to market. Agents and lenders will be watching whether rates keep rising in the coming weeks or begin to ease.