Mortgage rates have risen to their highest level in nearly three years, making it more difficult to buy a home at a time when housing prices are already high.
Nam Y. Huh/AP
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Nam Y. Huh/AP
Carrie Goldstein’s dream of a new home began with a family reunion at her cousin’s house in Milwaukee. The house was old with character and she could walk anywhere from the front door.
“We were pretty impressed and chatting about how easy it was to walk,” Goldstein said.
It was the lifestyle Goldstein wanted but lacked in her Cleveland suburb, which she said is also fairly walkable — with one major problem.
“There are a lot of sidewalks,” she said. “But you can’t really go anywhere.”
She brainstormed with her husband and realized they wanted to live near Rocky River. It was still a suburb, but with a quaint downtown and the ability to walk to Lake Erie.
But even though she wanted to move, one thing stopped her. The mortgage she would have to pay. Mortgage rates have risen to their highest level in almost three years, making buying a home impossible for many people at a time when property prices are also very high.
Goldstein faces a problem that affects many households at a time when people are already struggling with years of high inflation: the rising cost of borrowing.
Carrie Goldstein in front of her house on October 4, 2026. Housing prices and mortgage rates are preventing her from moving.
Mike Goldstein
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Mike Goldstein
Bond markets influence all types of borrowing costs across the economy — and as yields have risen to their highest levels in decades, they have driven up all kinds of interest rates paid by consumers, from home loans to cars to higher education.
And those rates are expected to continue rising after the Federal Reserve raised interest rates in September for the first time this year — while signaling that an additional hike could come this year.
The Federal Reserve’s rate hikes ripple through the economy and aim to slow consumer and business spending by making people hesitant to take out a more expensive loan to pay for a car or a house – two essential purchases for many people.
“If you need to borrow, boy, now is definitely not a good time,” says John Diamond, senior director of the Center for Tax and Budget Policy at the Baker Institute.
The real estate market remains in crisis
Buying a home is a key example of how households are affected when borrowing costs rise in the economy.
While mortgage rates were falling earlier this year, they reversed upward after the U.S.-Iran war spooked the bond market by sparking concerns about inflation. As a result, mortgage rates, influenced by bond markets, have jumped this year.
For example, at the current level of 7.28% for an average 30-year fixed-rate mortgage, a person could end up paying about $900 more than pandemic-era rates of 3% for a median-priced home.
Predictably, fewer homeowners are willing or able to make this financial leap, even if they have long outgrown their current home. Existing home sales in August were down about 1.2% from a year earlier, according to the National Association of Realtors.
Car loans are about to get more expensive
It’s not just mortgage costs that make Americans like Goldstein wince.
Along with her dream of owning a home in a walkable neighborhood, Goldstein is ready to buy a new car. His oldest is 11, has 150,000 miles and lots of quirks. Repair costs are approaching the point where they will exceed the value of the actual car.
But a four-year loan for a used car is about three percentage points higher than at the start of 2022, just when auto loans began to abandon their pandemic-era low rates and began to rise.
“You can’t buy a car for $150 or $180 a month anymore,” she said of the car payments she would face.
Although the Fed has only contributed a modest quarter of a percentage point so far, it adds to rising borrowing costs at a time when households are already facing inflation and rising prices for other types of borrowing.
“That’s on top of higher mortgage payments. Higher student loan payments. Higher prices due to inflation,” Diamond says. “That’s what makes it really painful.”
And that could mean households could continue to delay any major purchases that require a loan.
Goldstein is one of them. She says she can afford to wait for the car and the house. But eventually, she unsubscribed from real estate updates for this walkable suburb.
“It became more and more discouraging when I did the math,” Goldstein says. “It’s just not planned.”
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