Federal Reserve September Rate Hike Pushes 30-Year Mortgage Above 7 Percent
The Federal Reserve raised its benchmark interest rate by 25 basis points on September 16, 2026, pushing the federal funds rate to a range of 3.75 to 4 percent. Average 30-year fixed mortgage rates have since climbed above 7 percent, the highest level since early 2025.
WASHINGTON — The Federal Reserve raised its benchmark interest rate by 25 basis points on September 16, 2026, the first rate hike since July 2023. The move pushed the federal funds rate to a target range of 3.75 to 4 percent and sent mortgage rates above 7 percent.
The Fed cited persistent inflation, rising energy costs, and a strong labor market as reasons for the increase. Consumer prices rose 3.4 percent annually through August, driven in part by a 27.4 percent year-over-year surge in gasoline prices. The spike in gas prices is largely tied to supply chain disruptions following U.S. and Israeli strikes on Iran in February 2026, which affected oil tanker traffic in the Strait of Hormuz.
The 10-year Treasury yield climbed to 5.11 percent following the decision, its highest level in 19 years. Average 30-year fixed mortgage rates rose to between 7.19 and 7.43 percent in the days after the meeting.
Higher mortgage rates are squeezing homebuyers. Monthly payments on a median-priced home have risen sharply compared to two years ago, pricing many first-time buyers out of the market.
Core inflation, which excludes food and energy, remains closer to the Fed's 2 percent target at 2.4 percent. But Fed officials signaled that further rate increases may be necessary if overall inflation does not come down.
High-yield savings accounts and certificates of deposit are benefiting from the rate environment. Banks have raised deposit rates, giving savers better returns than they have seen in years.
Financial advisors are urging borrowers to shop around for mortgage rates, as offers vary significantly between lenders. They also recommend locking in rates if a home purchase is imminent, rather than waiting for rates to fall.
The next Federal Reserve meeting is scheduled for late October 2026.
