Borrowing costs hit a 20-month high after the Federal Reserve's first rate increase in three years
The average rate on a 30-year fixed-rate mortgage climbed to 6.95% for the week ending September 17, reaching its highest point since January 2025 and extending a streak of weekly increases to four consecutive weeks, according to Freddie Mac's Primary Mortgage Market Survey (PMMS).
The benchmark rate jumped 19 basis points from 6.76% the prior week and now stands 69 basis points above the 6.26% posted at the same point in 2025.
Sam Khater, chief economist at Freddie Mac in McLean, Virginia, said the rate environment remains unsettled. "The 30-year fixed-rate mortgage continues to fluctuate as markets assess economic data," Khater said.
The 15-year fixed-rate mortgage, a product frequently favored by homeowners refinancing existing loans, averaged 6.26%. That's up from 6.09% the prior week and 85 basis points above the 5.41% recorded a year ago.
Bill Dallas, Chairman of Dallas Capital, says too many mortgage professionals are treating today's market challenges as temporary, when the real shift may be structural.https://t.co/PIKUWA90Ss
— Mortgage Professional America Magazine (@MPAMagazineUS) September 16, 2026
What drove rates to their highest in 20 months
Two converging forces pushed borrowing costs sharply higher this week. On Wednesday, the Federal Reserve raised its benchmark interest rate for the first time in three years, ending a long stretch of consecutive holds as policymakers responded to persistent inflation.
That's driven in part by surging oil prices following the US–Iran conflict that began in late February.
The 10-year Treasury yield — which lenders use as a benchmark to price home loans — had been climbing for several weeks ahead of Wednesday's decision, pulling the average 30-year rate perilously close to 7%.
The yield briefly breached 5% on Monday, its first crossing of that level since 2023, before settling at 4.94% at midday Thursday.
Lisa Sturtevant, chief economist at Bright MLS in Washington, DC, said the Fed's move removes any near-term relief for buyers and the broader market.
"The rate hike all but guarantees that mortgage rates will remain stuck at or above the 7% threshold, which creates a psychological and financial barrier that will sharply squeeze affordability and sideline even more prospective buyers," she said.
What rising rates mean for buyers and brokers
Higher borrowing costs translate directly into reduced purchasing power and more difficult client conversations.
According to First American Financial Corporation data on how rising rates erode consumer house-buying power, a 25-basis-point increase in the 30-year rate reduces a typical buyer's purchasing power by approximately $11,000 — a figure that compounds quickly as the benchmark approaches 7%.
Jay Lessard, president and senior loan officer at Sonoran Lending in Scottsdale, Arizona, told Mortgage Professional America that clients are already registering the impact, even if most aren't monitoring the Fed day to day.
"Most consumers aren't necessarily following the Fed meeting day to day, but they're feeling the effects of higher rates and the overall cost of carrying debt," Lessard said.
"Credit cards, auto loans, and other monthly obligations have become increasingly expensive, so we're having more conversations about using home equity through HELOCs or fixed-rate second mortgages to improve monthly cashflow and get their finances in a better position."
Lessard said a broad buyer retreat was unlikely, however. "I do think the recent rise in bond yields and mortgage rates will cause some buyers to step back temporarily, particularly those who are already stretched from an affordability standpoint. But I don't think it will push everyone to the sidelines."
The broader affordability picture has deteriorated steadily since mid-year. According to the National Association of Home Builders (NAHB)/Wells Fargo Cost of Housing Index (CHI), a family earning the national median income of $106,800 would need to allocate 34% of earnings to cover mortgage payments on a median-priced new home in the second quarter, up from 32% in Q1, as rising rates eroded gains made earlier in the year.
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