Mortgage rates climb as 30-year fixed hits two-year high despite Fed hike
The 30-year fixed mortgage rate rose to its highest level in nearly two years after the Federal Reserve raised its benchmark rate, but the increase is driven more by Treasury yields and oil-price pressures than the Fed decision itself.
Mortgage rates for a 30-year fixed loan rose last week to about 7%, the highest level in almost two years, as the Federal Reserve lifted its short-term benchmark to a 3.75%-4% range. While the Fed’s move aims to curb inflation, it does not set mortgage rates directly; those rates tend to follow the yield on the 10-year Treasury note.
Before the Fed’s September meeting, the 10-year Treasury yield had reached 5%, its highest since 2023, pushing mortgage rates higher. After the Fed’s decision, yields briefly fell but soon rose again, influenced by external factors such as the Japanese central bank’s policy shift and ongoing geopolitical tensions that have kept oil prices elevated.
"While I don't expect one Fed meeting to change the housing market overnight, what matters now for Americans is whether their entire financial picture starts to feel more manageable," said Mike Miedler, president and CEO of Century 21 Real Estate.
Analysts note that oil-price volatility and inflation expectations remain the primary drivers of Treasury yields. A decline in oil prices could ease inflation pressure and help lower mortgage rates, but sustained high oil prices would likely keep rates elevated.
"If oil supplies improve and prices stabilize or move lower, that could ease some of the inflation pressure weighing on bonds and mortgage rates," said Jeff DerGurahian, chief investment officer at loanDepot.
Industry observers caution that mortgage rates are expected to stay high for the near term, though they could soften if inflation moderates and long-term yields fall. Potential pent-up housing demand may re-emerge if rates retreat.
"The hope is that the Fed raising rates will help potentially curb the steady rise of mortgage rates that we've seen recently, but there are many other factors as well," said Matt Schulz, chief consumer analyst at LendingTree.
For prospective homebuyers, the prevailing advice is to plan for higher borrowing costs and be prepared for possible rate fluctuations.