Mortgage rates rose significantly last week, up nineteen basis points according to the Freddie Mac Primary Mortgage Market Survey as of September 17th. This sudden spike marks the biggest one-week increase since April 2025 and pushes home borrowing costs to their highest point since January 2025. This marks the fourth consecutive week of increases, wiping out much of the summer’s brief affordability relief. The surge was primarily driven by a dramatic run-up in the 10-year Treasury yield, which recently hit multi-year highs. Bond markets have turned highly volatile ahead of the Federal Reserve’s upcoming interest rate policy decision and economic projections. Additionally, persistent high oil prices and broader geopolitical conflicts continue to fuel inflation expectations, keeping upward pressure on bond markets.
Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending September 11th. “Ongoing market concerns over spiking energy prices, persistently high inflation, and future monetary policy pushed bond yields and mortgage rates higher last week. As the 10-year Treasury inched closer to the 5 percent mark, mortgage rates followed and were almost 7 percent. The 30-year fixed rate was at its highest level since May 2025,” said Joel Kan, CMB, MBA’s VP and Deputy Chief Economist. “Purchase applications dipped relative to the week prior as higher mortgage rates caused many buyers to pause their purchase decisions. The current level of rates also eliminated much of the benefit to refinance for many borrowers, resulting in declines in conventional, FHA, and VA refinance applications.”
U.S. consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months. The Labor Department’s Consumer Price Index report last Friday followed strong readings in several components of the Producer Price Index released last Thursday. Most economists said that with the Iran war continuing, the energy shock would spread through the economy. “Energy inflation does not stay at the gas station. It travels by truck, airplane and cargo ship into nearly every store in America,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. “The Fed is now more likely than not to raise its policy rate; it cannot afford to let an energy shock become an everything shock.”
The Federal Reserve on Wednesday approved its first interest rate hike in more than three years and indicated another is to come, as part of an effort aimed at combating inflation brought on by spiraling oil prices and other factors. In a move that markets widely anticipated, the central bank’s Federal Open Market Committee voted 12-0 to increase its key interest rate by a quarter percentage point, or 25 basis points. The move brought the overnight funds rate to a target range of 3.75%-4%. During a news conference, Chairman Kevin Warsh said inflation has been “too high for too long. We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed,” he said. “Today, the FOMC decided that this standard has not been satisfied.”
