U.S. mortgage rates last week climbed to the highest level in more than a year, marking the latest setback for an already sluggish housing market.

The contract rate on a 30-year mortgage rose 12 basis points to 6.97% in the week ended Sept. 11, according to Mortgage Bankers Association data released Wednesday. That was the highest since May 2025.

Rates had dipped to their lowest level since 2022 in February, just before the start of the Iran war. Since then, they've moved significantly higher, in part because rising energy prices are stoking inflation concerns. 

Escalating borrowing costs have tamped down demand for loans. The MBA purchase index, a measure of loan applications, edged down 0.8% from the prior week. The group's refinance index fell 8.8% to its lowest level since May 2025. 

On Wednesday, the Federal Reserve is expected to raise interest rates for the first time since 2023 in an effort to tamp down inflation. 

The Fed's decision won't directly impact mortgage rates but could reverberate across bond markets. Mortgage rates closely track the 10-year US Treasury yield, which climbed this week to the highest level in almost two decades.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the U.S.