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Mortgage Rates Hit 6.95 Percent as Fed Hikes Benchmark

By Markets Desk · 2026-09-20 · 2 min read
A large, classical stone building with columns and a dome representing a central bank institution.
Illustration: Tradingbird

The Federal Reserve raised its benchmark rate on Wednesday. Mortgage rates have climbed to their highest level in eighteen months.

The average 30-year mortgage rate reached 6.95 percent last week. This marks the highest level in more than a year and a half. The Federal Reserve hiked its benchmark interest rate on Wednesday. President Donald Trump renewed his attacks on the central bank following the decision.

Economists state that broader economic trends drive long-term borrowing costs more than Fed policy. The economy is growing steadily despite repeated shocks. Inflation remains stubbornly high. These factors point to higher interest rates regardless of central bank actions.

Structural Shift in Economic Demand

Joe Brusuelas, chief economist at RSM, cites a structural transformation of the economy. Consumer and business demand is now healthy. This demand collides with supply shocks and bottlenecks. Oil and gas prices have risen due to the Iran war.

The AI buildout faces shortages of computer chips and electronic equipment. There is also a shortage of workers to assemble infrastructure. Brusuelas notes that this regime change in inflation is the direct outcome. The economy has moved away from the weak demand seen in the 2010s.

Capital Flows Into AI Infrastructure

Big tech firms are borrowing huge amounts of cash. They are plowing money into data center construction. Companies like Alphabet and Meta are using stockpiled cash and new debt. This investment activity has changed the capital landscape since 2008.

Federal Reserve Chairman Kevin Warsh highlighted this shift at Jackson Hole. He noted that ever-expanding pools of capital are pouring into AI-related infrastructure. This contrasts with the post-2008 view that capital would sit idle. Growth is no longer expected to be low and slow.

Bond Yields and Consumer Pressure

The yield on the 10-year Treasury bond topped 5 percent this year. This was the first time since 2023. It occurred before the Fed raised its short-term rate. Government bonds are competing for lenders alongside private sector debt.

Inflation has outpaced annual wage growth for the past five months. Affordability remains a top concern for Americans heading into midterm elections. Bank of America forecasts growth will reach 3 percent at an annual rate. This forecast was based on recent retail sales data.

The low interest-rate environment of the past fifteen years has ended. A higher-priced, higher-rate world is taking its place. The trends described by GN auto markets/forex sources indicate persistent pressure on borrowing costs. The era of sub-3 percent mortgage rates is over.

Based on reporting by abcnews.com, compiled by the Tradingbird desk.

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