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The Bigger Economic Story Behind Higher Mortgage Rates

Higher mortgage rates are squeezing homebuyers, but the story extends well beyond housing. Persistent inflation and higher interest rates are reshaping investment and financial markets—and raising an overlooked question about how we measure money.

Mortgage rates have crossed an uncomfortable threshold again. The average 30-year fixed mortgage rate rose to 7.28 percent this week, its highest level since November 2023, according to Freddie Mac. It was the sixth consecutive weekly increase, and the largest one-week jump in nearly four years.

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For prospective homebuyers, the effect is immediate as higher mortgage rates translate into larger monthly payments and less purchasing power. For many households, the question is no longer simply what kind of home they can buy, but whether homeownership itself remains within reach, a growing challenge to the traditional American dream of owning a home.

Higher rates also pressure people who already own homes. Millions of households locked in much lower mortgage rates in earlier years. Selling a home can now can mean giving up that inexpensive financing and taking on a new mortgage above 7 percent. That so-called lock-in effect can discourage people from moving, limiting the supply of homes for sale even as high borrowing costs weaken demand.

More than a housing story

But the return of 7 percent mortgages tells us something larger than what is happening in housing. It is one visible consequence of an interest-rate environment that has remained tighter than many households, businesses and investors expected. On Sept. 16, the Federal Reserve raised its benchmark rate by a quarter point, to a range of 3.75 to 4 percent, its first increase since 2023. That move reinforced the message: inflation has remained persistent enough that policymakers were willing to tighten monetary policy again rather than continue moving toward lower rates.

September payrolls increased by just 29,000, well below economists’ expectations, and unemployment rose to 4.2 percent. The weak report reduced expectations for an October rate increase, even as inflation and........

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