US mortgage rates have risen for the fifth consecutive week, reaching the highest level of the year. Amid ongoing tensions in the Middle East, the Federal Reserve's decision to hold interest rates steady, and growing market concerns over inflation, long-term US Treasury yields have remained elevated, further pushing up mortgage financing costs and adding pressure to an already sluggish housing market.

According to data released by Freddie Mac on Thursday, the average rate on a 30-year fixed-rate mortgage for the week rose to 6.69% from 6.66% the previous week, marking its highest level since July 31, 2025. The continuous climb in mortgage rates is prompting many potential homebuyers, who were already sidelined due to affordability concerns, to further postpone their purchase plans.

Data from the Mortgage Bankers Association shows that as mortgage rates continued to rise, new mortgage application volumes declined in the final two weeks of July, indicating that rising financing costs are curbing housing demand. Mortgage rates typically move in tandem with the yield on the 10-year US Treasury note.

Last week, Federal Reserve Chair Warsh sent a somewhat mixed signal regarding future policies to control inflation, pushing the 10-year Treasury yield to an 18-month high at one point. Subsequently, long-term Treasury yields eased as the US, Iran, and Oman neared an agreement to reopen the Strait of Hormuz, but they remain significantly higher than levels seen for most of 2025.

The persistently high financing costs are further exacerbating the US housing affordability problem. The latest data from real estate brokerage Redfin indicates that the annual income required for a US resident to purchase a typical home is now close to $110,000, remaining near historic highs. While entry-level homes are relatively cheaper, high renovation costs are diminishing their actual affordability.

Redfin senior economist Yingqi Xu stated that first-time buyers are already near their budget limits to afford monthly mortgage payments, making them generally cautious about homes requiring significant repairs or renovations. "Entry-level homes often involve trade-offs, and finding a suitable property is a challenge in itself. For first-time buyers with already tight budgets, they are usually unwilling to take on the additional cost of high renovation expenses," she said.

Currently, the US housing market is showing a clear divergence. Benefiting from the wealth effect of a rising stock market, demand from high-income groups remains relatively stable, while middle- and lower-income buyers are increasingly exiting the market. According to a report from Zillow released in July, sales of entry-level homes in the US fell by 5.4% year-over-year in May, while sales of luxury homes increased by 6.2% over the same period.

However, with increased market supply, buyer bargaining power has improved compared to previous years. Redfin data shows that the number of homes for sale nationwide currently exceeds the number of buyers by nearly 500,000 units, and about one-fifth of listings have seen price reductions, offering buyers more room for negotiation. Lawrence Yun, chief economist at the National Association of Realtors, noted that income growth is now outpacing home price increases, which has somewhat improved housing affordability. He pointed out, however, that the biggest short-term factor affecting housing affordability remains the rising mortgage rates.