Mortgage rates keep raising the roof

US mortgage rates are climbing higher than your outdoorsy friend who insists the hike is “basically flat.”

The average rate on a 30-year fixed mortgage hit 7.28% last week, according to Freddie Mac, its highest level in nearly three years. That’s up a full quarter-point from the previous week, marking the largest weekly increase in roughly four years.

Buyers are feeling the heat

Mortgage applications fell 4.2% last week, per the Mortgage Bankers Association, while applications to purchase homes dropped 2%. Refinancing activity fell 8% and was 56% lower than the same week last year.

Borrowers are also looking for ways to soften the blow. Adjustable-rate mortgages, which typically offer lower initial rates, accounted for 10.3% of mortgage applications last week.

The name's bond...Treasury bond

Mortgage rates tend to move alongside yields on 10-year US Treasury bonds, which climbed above 5.3% this week to their highest level in 24 years amid concerns that rising oil prices and stronger-than-expected economic growth will keep inflation high. The Fed’s preferred inflation gauge rose 3.4% annually in August, compared with its 2% target.

The ripple effects extend well beyond Zillow tabs. The 10-year Treasury is a major benchmark for borrowing costs across the economy, meaning higher yields can make financing more expensive for everything from homes and cars to businesses.

Zoom out: Mortgage rates have climbed by ~1.4 percentage points since the US-Israel war with Iran began in late February, adding another affordability hurdle for a housing market already struggling to attract buyers.