Mortgage Rates Top 7 Percent Again as Fed Rate Hike Squeezes Housing Market

Average 30-year fixed mortgage rates climbed above 7 percent in early October 2026, reaching approximately 7.38 percent, after the Federal Reserve raised its benchmark interest rate by 25 basis points in September. It was the Fed's first rate increase since 2023.

The rate hike pushed the federal funds rate to a target range of 3.75 to 4.00 percent. Treasury yields responded quickly, with the 10-year yield hitting 5.11 percent in late September, a 19-year high. Mortgage rates, which track the 10-year Treasury, followed.

The jump above 7 percent is squeezing an already slow housing market. Existing-home sales have declined as high monthly payments deter buyers. Sellers in many markets are offering concessions, including closing-cost assistance and price reductions, to attract interest.

Adjustable-rate mortgage applications have risen in response, with ARMs now accounting for nearly 10 percent of mortgage applications. Buyers are turning to ARMs to secure lower initial rates, accepting the risk that payments could rise if rates remain elevated.

New-home builders are using incentives including mortgage-rate buydowns to offset the impact of higher borrowing costs. Some builders are buying down rates to the mid-5 percent range for buyers who purchase directly from them.

Most major forecasters, including Fannie Mae, Wells Fargo, and the Mortgage Bankers Association, expect 30-year rates to stay between 6.5 and 7 percent through the end of 2026 and into 2027. The Federal Reserve's next meeting is scheduled for October 27 and 28, and most analysts expect the central bank to hold rates steady at that session.