Residential mortgage rates rose a bit more than 10-year Treasury yields, and borrowing for home purchases remained depressed, according to minutes of the Federal Reserve’s September 15-16 meeting, released October 7. Both lines come from the Fed staff’s review of financial conditions, which also called financing somewhat restrictive for residential mortgage borrowers. Outside of mortgages, the staff said, consumer borrowing costs were little changed over the period between meetings. Housing is the one sector a few policymakers singled out as getting little support from financial conditions.
Mortgage rates ran ahead of Treasury yields
The staff wording is plain: residential mortgage rates increased a bit more than 10-year Treasury yields. That places mortgages on top of a broad move in government borrowing costs, since nominal yields rose around 35 basis points across the 2- to 10-year stretch of the yield curve. A basis point is one-hundredth of a percentage point, so 35 of them equal 0.35 points. A mortgage rate that outran the 10-year yield started from a market that was already moving sharply.
For a household shopping for a home loan, the question is how much of a higher rate comes from the Fed and how much from the bond market. The Committee’s decision, a quarter-point increase to a target range of 3-3/4 to 4 percent on a 12-0 vote, moved the overnight rate. The staff’s review of financial conditions shows mortgage pricing following longer-term yields and adding a little more on top of them. Anyone comparing offers is looking at that longer-term number, not the 4 percent ceiling of the new range.
Freddie Mac publishes a new weekly mortgage rate average every Thursday, and the Fed meets again October 27-28.
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Freddie Mac’s weekly survey shows where those rates landed. The 30-year fixed average was 7.28 percent as of October 1, up from 7.03 percent a week earlier and 6.34 percent a year before, a rise of 94 basis points over twelve months. The 15-year fixed averaged 6.60 percent, against 6.42 percent the prior week and 5.55 percent a year earlier. The survey’s next reading is due Thursday, October 8, and it will show whether the climb continued into the week the minutes became public.
Home-purchase borrowing stays depressed
Borrowing for home purchases remained depressed, in the staff’s words, even though total home equity borrowing stayed near pre-pandemic levels. The split is informative. Purchase loans are what a buyer takes out to acquire a house, while home equity borrowing is credit against a house already owned, and the minutes describe the first as weak while the second sat near its pre-pandemic level. The staff also described credit as generally available to most households and businesses, which points to the price of mortgage credit, not its supply, as the pressure on buyers.
A few participants carried the point into the policy discussion. They said housing was a sector where financial conditions did not appear supportive of activity, with mortgage rates remaining at elevated levels. The minutes give no names and no count beyond “a few.” The Committee, chaired by Kevin Warsh, approved the rate increase 12-0, so the concern about housing sat alongside a unanimous vote to raise the cost of short-term money rather than against it.
Why the Fed’s rate and mortgage rates move apart
The Board of Governors raised the interest rate on reserve balances to 3.90 percent and the primary credit rate to 4.0 percent, both effective September 17. Those administered rates sit beneath the federal funds range and shape short-term borrowing. A 30-year mortgage lasts far longer, so lenders price it against longer-term Treasury yields plus their own costs and margins, which is why the staff measures mortgages against the 10-year yield rather than the policy rate. Freddie Mac’s 7.28 percent average sits about 3.3 percentage points above the 4 percent top of the new range.
That spread explains why a quarter-point move by the Committee does not pass through to mortgage payments one for one. The minutes also record that most participants judged another increase in the federal funds range would likely be appropriate by year end, but that is a view about short-term policy, and the staff language on mortgages concerns the longer-term yields lenders follow. Whether the next move lifts those yields is a market judgment that the October 27-28 meeting will feed rather than settle.
Comparing mortgage offers while rates sit near 7.3 percent
The Consumer Financial Protection Bureau runs a free tool that shows how credit score, down payment, loan term and loan type change a mortgage rate, and it recommends comparing Loan Estimates from several lenders because fees, points, mortgage insurance and closing costs add to the total. The tool’s rate data is dated April 1, 2025, so it illustrates how the factors work and does not quote today’s market.
Freddie Mac’s figure is a national weekly average, so an individual quote will differ with the same factors the CFPB tool compares. A borrower with a 700 credit score and 10 percent down is the tool’s default case; a 625 score or a smaller down payment prices differently. The gap between a personal quote and the 7.28 percent average is the number worth taking to each lender.
The minutes describe a credit market in which cards and other consumer loans barely moved while mortgages cost more and purchase borrowing stayed weak. Freddie Mac’s October 8 survey and the Committee’s October 27-28 meeting are the next official checks on whether that gap between mortgages and everything else narrows or widens.
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This article was produced with AI assistance and reviewed by The Money Overview’s editorial team.
