Mortgage rates rose sharply in September as multiple factors applied significant upward pressure on the U.S. treasury yields. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.86% in September, up nearly 20 basis points (bps) from August. The recent increase effectively erased the improvement in mortgage rates over the past year, with the 30-year mortgage rate reaching 7.03% by the end of the month. Compared to a year ago, the average rate is higher by 51 bps. The 15-year mortgage rate averaged 6.20% in September, up 22 bps from August and 70 bps from a year ago.
The 10-year Treasury yield, a key benchmark for long-term borrowing, jumped 26 bps to an average of 4.94% in September and surpassed 5.00% toward the end of the month. Yields climbed as bond markets priced in a Federal Reserve rate hike ahead of the September FOMC meeting, while weak demand at Treasury auctions added further upward pressure. Broader concerns over elevated oil prices and geopolitical tensions, the U.S. fiscal deficit, and strong competition for capital from AI and hyperscaler investment also contributed to the rise in long-term yields.
The Federal Reserve ultimately raised the federal funds rate by a quarter percentage point at its September meeting, bringing the target range to 3.75% to 4.00%. The Fed noted that economic activity continued to expand at a solid pace, domestic spending remained resilient, and capital investment was robust, while inflation and uncertainty surrounding geopolitical developments remained elevated.
