Mortgage Rates Hit 7.28% Ahead of Expected Fed Hike
Average 30-year mortgage rates have risen to 7.28%, driven by bond market volatility and inflation. The Federal Reserve is widely expected to raise its benchmark rate this week, which economists say will maintain pressure on housing affordability.
Mortgage rates climbed again in September, pushed higher by geopolitical turmoil and bond market volatility. According to data from HousingWire's Mortgage Rates Center, the average rate for a 30-year conforming loan reached 7.28% on Tuesday, a jump of 22 basis points over the prior two weeks.
This marks a sharp reversal from the start of the year, when rates were nearly a full percentage point lower and expectations pointed toward Federal Reserve rate cuts. With inflation persisting above the Fed's 2% target, a rate hike at the central bank's meeting this week now appears certain.
| Loan Type | Average Rate | Two-Week Change |
|---|---|---|
| 30-Year Conforming | 7.28% | +22 bps |
| 30-Year Jumbo | 7.47% | +21 bps |
| 30-Year FHA | 6.86% | +18 bps |
Melissa Cohn, regional vice president at William Raveis Mortgage, expressed disappointment at the trend. "We started this year thinking that mortgage rates were settling down," Cohn told HousingWire. "The 30-year fixed rate got as low as 5.75% with no points for a good borrower."
First Rate Hike in Over Three Years
The Federal Reserve has not raised its benchmark interest rate since July 2023. A hike this week would end a streak of five consecutive meetings with no change. Interest rate traders overwhelmingly anticipate a move, with the CME Group's FedWatch tool showing a 92% probability of a 25-basis-point increase.
Sam Williamson, a senior economist at First American, identified bond market volatility as a primary driver of higher mortgage rates. He noted the 10-year Treasury yield has climbed toward 5%. Williamson said the Fed's updated economic projections will be key in signaling its future path. A "higher-for-longer" stance could keep upward pressure on Treasury yields and, by extension, mortgage rates.
Cohn offered a contrasting short-term view. She suggested a Fed hike could reassure the bond market of the central bank's inflation-fighting resolve, potentially leading to a rally that lowers mortgage rates temporarily.
Policy Moves Fail to Lower Yields
A recent Treasury Department announcement of a multi-billion dollar long-term debt buyback program has failed to achieve its intended effect of lowering rates. Cohn criticized the timing of the move ahead of midterm elections as politically motivated. She noted that since the announcement, bond yields have moved higher.
"When Secretary Bessent announced that it was going to be a $6 billion bond buyback program, the bond market said, 'Really?' and bond yields went even higher," Cohn said. The bond market, she argued, is signaling the policy is a mistake.
Williamson reiterated that for homebuyers, the path to lower mortgage rates still depends on lower inflation. While restrictive policy may help convince investors inflation will be controlled, meaningful rate relief is not yet in sight.
Market Adapts to Higher Borrowing Costs
Industry executives note the housing market is adjusting. Dan Ribler of Longbridge Financial linked rising Treasury yields to a strong economy, citing record manufacturing activity as a key inflation indicator driving the repricing of long-term debt.
For buyers, the calculus is shifting. Hector Amendola, president of mortgage lender SimplyPMG, argued that while rates are higher, buyers now have better negotiating power. Houses are sitting on the market longer, bidding wars have cooled, and sellers are more receptive to offers with buyer assistance programs attached.
Charles Goodwin of Kiavi said the market for real estate investors remains well positioned. He noted competition among lenders for certain investment products remains fierce, with firms competing on execution speed and process ease to give investors options, particularly in cash-flow-friendly markets like the Midwest.
