Mortgage Rates Hit 6.95% as Fed Hikes Rates for First Time Since 2023
Thirty-year fixed rates rose to 6.95% after the Federal Reserve increased benchmark rates. Forecasters expect modest easing by year-end.
Key points
- The 30-year fixed mortgage rate averaged 6.95% this week, the highest since January 2025.
- Fannie Mae and the MBA forecast rates will fall to 6.8% by the end of 2026.
- The Federal Reserve raised its benchmark rate for the first time since 2023 last week.
The 30-year fixed mortgage rate averaged 6.95% this week. This level marks the highest average since January 2025 according to Freddie Mac data. Homebuyers face a sharper cost increase than predicted earlier in the year.
The Federal Reserve raised its benchmark interest rate by a quarter point last week. This was the first increase since 2023 and directly influenced mortgage pricing. Some trackers now show conforming rates above 7%.
Forecasters Expect Modest Rate Retreat
Major institutions predict a slight decline in rates by December. Fannie Mae and the Mortgage Bankers Association both forecast 6.8% by year-end. This remains higher than the 6.4% average projected in June.
Keefe Bruyette and Woods anticipates rates near 6.5% at year-end. This projection relies on the 10-year Treasury yield staying at 4.75%. Such levels remain well above the 5.98% low seen in late February.
Inflation Risks Limit Downside Room
Market participants see higher risks for future rate increases. CME FedWatch data shows nearly even odds for an October hike. Only 13% of traders expect no change in the December meeting.
Redfin analysts note that Fed officials believe more tightening is necessary. Factors like oil prices and tariff effects complicate the outlook. Significant rate relief is unlikely until these underlying drivers stabilize.
Borrowers Face Persistent High Costs
UrbanTurf reports that forecasters have revised their numbers upward throughout the year. The expected range for December is roughly 6.5% to 6.8%. This outcome is below current levels but still historically elevated.
BTIG analysts warn that current pricing exceeds Fannie Mae assumptions. This discrepancy suggests further downside risk for housing forecasts. Buyers should plan for sustained high borrowing costs through 2026.
