Mortgage Applications Fall 1.5% After Fed Hikes Rates to 4%
Mortgage applications dropped 1.5% last week as rates hit 6.95% following the Federal Reserve's decision to raise interest rates.
Key points
- Mortgage applications fell 1.5% for the week ending Sept. 18 following the Fed's rate hike.
- Refinancing activity hit its slowest pace since February 2025, dropping 62% year-over-year.
- The share of adjustable-rate mortgage applications climbed to 9.8% as fixed rates rose to 6.95%.
Mortgage applications fell 1.5% for the week ending Sept. 18. This decline followed a Federal Reserve decision to raise interest rates by a quarter-percentage point.
The rate hike pushed benchmark rates to 4% from 3.75%. Mortgage rates climbed to 6.95%, up from 6.76% the previous week. These changes slowed borrower activity significantly.
Refinancing Activity Hits Slowest Pace Since February
Refinancing applications dropped 3% week-over-week. They are now 62% lower than in the same week a year ago. This marks the slowest pace since February 2025.
Purchase applications for single-family homes fell 1% week-over-week. They are down 11% from a year ago. Higher costs are discouraging buyers from entering the market.
Borrowers Shift Toward Adjustable-Rate Mortgages
The share of adjustable-rate mortgage applications rose to 9.8%. Borrowers are choosing this option as fixed rates climb. This shift reflects a search for lower initial payments.
FHA loan application share fell to 16.7% from 16.9%. VA loans dropped to 12% from 12.4%. USDA loans increased slightly to 0.6% from 0.4%.
Fed Cites Persistent Inflation as Primary Driver
Fed Chairman Kevin Warsh stated that inflation remains too high. He emphasized the committee's resolve to achieve price stability. The unanimous vote signals a firm stance on monetary policy.
Mortgage rates track the 10-year Treasury note yield. Lenders add a risk premium to this benchmark. Investor expectations for inflation heavily influence these long-term yields.
