Key facts
- The Federal Reserve raised its benchmark federal funds rate by 25 basis points on September 16, 2026.
- The average 30-year fixed mortgage rate was approximately 7.43% as of mid-September 2026.
- The 10-year Treasury yield rose from 4.80% on September 8 to 4.96% on September 11, 2026.
- Inflation remains above the Fed's 2% target, partly due to higher oil prices.
Prospective homebuyers and those looking to refinance may need to monitor the Federal Reserve's actions closely, as a recent rate hike could influence mortgage rates. As of mid-September 2026, the average 30-year fixed mortgage rate stood at approximately 7.43%, a notable increase from 6.43% in early July. This rise can significantly impact monthly payments on home loans.
The Federal Reserve's Federal Open Market Committee (FOMC) decided to raise the federal funds rate by 25 basis points on September 16, 2026, bringing the target range to 3.75% to 4%. This decision was driven by persistent inflation, which remains above the Fed's 2% target and has been exacerbated by rising oil prices, partly due to renewed conflict in Iran. The Fed's goal with this rate hike is to curb inflation by increasing borrowing costs.
While the Fed directly controls the federal funds rate, a short-term benchmark, it does not directly set fixed mortgage rates. Mortgage rates are more closely linked to longer-term bond yields, such as the 10-year Treasury yield. However, these yields are influenced by many of the same factors that drive Fed policy, including inflation expectations and the anticipated path of interest rates. The 10-year Treasury yield had already shown upward pressure, moving from 4.80% on September 8 to 4.96% on September 11, 2026.
If the Fed raises rates and signals further increases, mortgage rates could face additional upward pressure. Investors might demand higher yields on longer-term bonds if they anticipate sustained high inflation or prolonged restrictive monetary policy. Lenders could then pass these higher costs onto borrowers through increased mortgage rates. However, the relationship is not always direct, and mortgage markets may have already priced in the expected Fed hike. The Fed's monetary policy is one of several factors influencing mortgage rates, alongside job creation pace and overall economic growth.