Mortgage Rates Park at 7.4% and Split the US Housing Market in Two
Freddie Mac's Primary Mortgage Market Survey, released October 15, put the average 30-year fixed mortgage at 7.40%, unchanged from the week before and still the highest reading since Nov. 16, 2023, when it stood at 7.44%. A year ago it was 6.27% — 113 basis points lower. The 15-year fixed averaged 6.71%, down from 6.73% a week earlier but well above last year's 5.52%.
"The average 30-year fixed-rate mortgage remained unchanged this week," Freddie Mac chief economist Sam Khater wrote in the release. The flat reading ends seven consecutive weekly increases, including the 12-basis-point jump to 7.40% from 7.28% in the week ended Oct. 8 — a run that had held the benchmark above 7% for three straight weeks.
The Mortgage Bankers Association's survey for the week ended Oct. 9 showed total mortgage applications down 2.7%, purchase applications down 4% and refinance applications down 0.4% — refinancing now runs 56% below year-ago levels. The MBA's own 30-year measure has reached 7.5%. Joel Kan, the MBA's deputy chief economist, said earlier this month that purchase activity was falling across all loan types, with FHA applications dropping the most, down 6%.
Redfin counted roughly 928,892 buyers in the market nationwide in September, the lowest in records going back to 2013 and a fifth straight monthly decline. Sellers totaled about 1,510,784, the most since March 2020. That 63% gap is the widest in at least 13 years.
Redfin puts the typical homebuyer's monthly payment at $2,777 — the highest on record except the previous week. Bankrate's calculator frames the stakes: a median-priced $425,000 home with 20% down and a 30-year loan at 7.5% costs about $3,000 a month in principal, interest, taxes and insurance. At 6.5%, that falls to under $2,800.
The National Association of Realtors reported September existing-home sales up 1.5% month over month to a 3.99 million annual rate, still down 2.2% year over year. Unsold inventory climbed to 1.60 million units, the highest since November 2019, equal to 4.8 months of supply. The median existing-home price rose 1.3% from a year earlier to $417,500 — the 39th straight month of annual gains and the highest ever for a September. The Northeast gained 4.7% to $523,600; the West fell 0.3% to $613,600.
Pending sales fell 4% in September on a seasonally adjusted basis, the biggest monthly drop in more than three years and the lowest level since spring 2014 outside the pandemic freeze of April 2020. Declines were steepest in Seattle (-24.4%), Los Angeles (-16%) and San Diego (-15.8%). Zillow's tally has September pending sales down 8.5% year over year. Of September's closed sales, 60.5% went below asking price, and the median asking price fell 0.3% annually in the four weeks ending Oct. 11, the first annual decline since March.
Mortgage rates track the 10-year Treasury yield, which spiked to 5.342% on Oct. 1 — its highest since 2002 — while the 30-year Treasury touched a 24-year high of 5.733% before easing. Even after the pullback, the 10-year held above 5.2% in mid-October. DZ Bank puts the 10-year's term premium at 91 basis points, the highest since 2014. The U.S.-Iran conflict and rising energy costs keep inflation worries alive.
On Sept. 16 the Federal Reserve raised its benchmark rate a quarter point to 3.75%-4.00%, the first increase since July 2023, in a unanimous 12-0 vote. Chair Kevin Warsh said inflation "is too high and has been for too long." The dot plot showed 12 of 18 participants expecting one more quarter-point hike before the end of 2026, and CME data put the odds of a hold at the next meeting near 73%.
NAR data show first-time buyers accounted for 31% of September sales, up from 30% in August and a year earlier — but well short of the 40% share NAR considers healthy. In NAR's 2025 buyer survey, first-timers were just 21% of purchases, the lowest since the survey began in 1981, at a record median age of 40. CNBC reports one in three renters believes they will never afford a home.
Fannie Mae sharply raised its outlook in October: 7.4% for the fourth quarter of 2026 and 7.5% for all of 2027, versus prior calls of 6.8% and 6.7%. It also cut projected home-price growth to 0.6% in 2027 from 2.7% this year. The MBA expects originations to fall 5% in 2027 with rates above 7% all year. In a HousingWire survey, roughly seven in ten mortgage executives expect rates at 7.5% or higher into 2027, and 43% expect at least 8%.
The market is splitting by whether a buyer needs a loan: cash purchasers keep closing while rate-dependent buyers are priced out. Cotality's analysis suggests that if "higher for longer" becomes the consensus, some sidelined buyers may stop waiting and buy. The next tests are the coming inflation data and whether the Fed moves again in December, the two inputs that decide whether 7.4% is a ceiling or a waypoint.