Mortgage rates continued to increase last week, up another 8 basis points according to the Freddie Mac Primary Mortgage Market Survey as of September 24th. This marks the fifth consecutive week of increases in the 30-year fixed rate mortgage and puts the average rate above 7.00% for the first time since January 2025. With inflation remaining above the Federal Reserve’s 2 percent target and the Iran war continuing to push up energy prices, analysts expect home borrowing costs to remain elevated.
Mortgage applications decreased 1.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending September 18th. “Mortgage rates vaulted higher last week, with the 30-year fixed rate at its highest level since May 2024. With fixed rates much higher, more borrowers opted for ARMs, with the ARM share reaching 9.8 percent, as rates for 5/1 ARMs were more than a percentage point lower than those for fixed rate loans,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Applications for both refinance and purchase loans declined further last week. With this week’s decline, the pace of refinancing fell to its slowest pace since February 2025”.
Fewer people applied for U.S. unemployment benefits last week, as U.S. jobless claims remain at historically low levels and most Americans enjoy job security. The Labor Department said that 197,000 people applied for unemployment checks last week, the fewest since mid-July and down from a revised 198,000 the week before. The four-week average of claims, which smooths out week-to-week ups and downs, fell to 202,250 last week from 204,000. Claims for jobless benefits are a proxy for layoffs, and economists watch them because they can be a sign of where the job market is headed. So far this year, claims have mostly stayed below 220,000, historically low. The American job market has remained sturdy despite higher energy prices that have squeezed businesses and consumers since the fighting with Iran began Feb. 28.
Federal Reserve sentiment over the past week has been decidedly hawkish, driving up the US Dollar and reinforcing expectations for another interest rate hike before the end of the year. Following the Fed’s unanimous 25-basis-point rate hike to a range of 3.75%–4.00% under Chair Kevin Warsh, a steady stream of central bank speakers has emphasized that strong economic growth and persistent inflation risks outweigh concerns over employment. Markets have reacted to this coordinated messaging by pricing in much higher odds of another rate hike in the upcoming meetings, pushing short-term Treasury yields and the dollar index upward.
