Freddie Mac’s latest Primary Mortgage Market Survey put the average 30-year fixed mortgage rate at 7.03% as of Sept. 24, up from 6.95% a week earlier. The 15-year fixed rate climbed to 6.42% from 6.26%.
The move marks the fifth consecutive weekly increase in the 30-year rate and leaves borrowing costs well above the 6.30% average from a year ago.
The immediate culprit is not simply the Federal Reserve. Mortgage rates are driven heavily by the bond market, and the 10-year Treasury yield finished Sept. 25 at 5.17% after reaching even higher levels earlier in the week.
The Fed Raised Rates, but Mortgages Follow the Bond Market
The Federal Reserve raised its benchmark rate by 25 basis points to 3.75%-4.00% on Sept. 16, citing resilient growth and elevated inflation.
That matters for financial conditions, but the Fed does not directly set mortgage rates.
Lenders price home loans primarily from longer-term Treasury yields and mortgage-backed securities. That is why Coinpaper’s earlier mortgage-rate coverage focused on the 10-year Treasury as the more important near-term signal for borrowers.
The recent bond selloff has been driven by a mix of strong economic data, elevated energy prices, inflation concerns and heavy government borrowing. Those forces pushed the 10-year yield above 5% even before mortgage rates crossed 7%.
What 7% Means for Homebuyers
The difference between 6.5% and 7% may look small, but it materially changes monthly payments.
Freddie Mac estimates that a $300,000 30-year mortgage costs about $1,996 per month at 7%, compared with roughly $1,896 at 6.5%, before taxes and insurance.
That is about $100 more each month, or roughly $1,200 a year.
The direction from here depends less on the Fed’s next headline decision and more on whether long-term yields cool.
Our explainer on why Treasury yields can rise even when the Fed cuts shows why mortgage borrowers should watch inflation expectations, government borrowing and the term premium, not just the federal funds rate.
