As widely expected, the Federal Reserve raised its benchmark Federal Funds Rate by 25 basis points last week making it the first rate hike in three years. This week’s update covers what that means for mortgage rates, where things stand heading into the next FOMC meeting, and a strategy worth considering if you’re buying or selling in today’s market.
Recap: The Fed’s First Hike in Three Years
The decision was unanimous, with the Fed pointing to elevated inflation as the key driver behind the move. Keep in mind, the Fed Funds Rate is the overnight rate banks charge each other — it’s not the same as your mortgage rate. Looking ahead, the Fed’s latest projections suggest another hike could be on the table before year-end: 16 of 18 officials are now projecting a higher Fed Funds Rate by December. In housing news, new construction cooled in August while builder confidence remained subdued, as higher mortgage rates, labor shortages, and elevated construction costs continue to weigh on builders. The resale market showed a bit more resilience and pending home sales rose 0.3% from July to August, though they remained 4.7% below year-ago levels. Even with mortgage rates higher, buyers are still moving forward; NAR Chief Economist Lawrence Yun noted that buyers were “steadily entering into contracts” last month. Elsewhere in the economy, retail sales jumped 1.2% in August, with 12 of 13 retail categories reporting gains. Initial unemployment claims remained relatively low at 196,000, while continuing claims stayed elevated at 1.73 million. It’s also worth noting that mortgage rates have continued trending higher since the start of the conflict in Iran, adding another layer of uncertainty to an already volatile rate environment.
Optimal Blue Mortgage Rate Index
The Optimal Blue index put the average 30-year fixed rate at 7.038% as of Friday, September 18th, the highest it’s been since May of 2024. A quick reminder on how to read this index: it reflects an average about 35% of mortgage transactions nationwide — it’s not a rate quote. You can’t lock in last week’s rate today, and your credit score, loan-to-value ratio, and other factors will all affect what you actually qualify for. This is simply meant to give you a sense of the direction rates are trending. Click here: If you would like to see current mortgage rates based on your personal scenario for your home located anywhere in Washington.
Economic Calendar
It’s a fairly light week on the economic calendar:
- Monday: No major economic news
- Tuesday: ADP Weekly
- Wednesday: Mortgage Applications
- Thursday: Jobless Claims, New Home Sales
- Friday: Durable Goods Orders
The next FOMC meeting is October 27–28, 2026, and CME’s FedWatch tool currently puts the odds at 55% for another 25 basis point increase.
Where Mortgage-Backed Securities Stand This Morning
As of late morning Pacific time, mortgage-backed securities were up a welcome 24 basis points. It’s been a rough month for mortgage rates overall, but movements like this are a reminder of how quickly things can shift day to day.
Weekly Spotlight: Seller Concessions Can Work in Your Favor
Higher mortgage rates don’t just affect buyers — they affect sellers too. And if you’re house hunting right now, that shift can actually put you in a stronger negotiating position. I’m not just talking about price reductions here — I’m talking about seller credit or concessions, especially ones that help buy down your interest rate. What you can request depends on your loan type, your down payment, and occupancy. But here’s something worth thinking through: compare a $20,000 price reduction to putting that same $20,000 toward a rate buydown instead. You may be surprised how much more you can save over time with the rate buydown compared to the price reduction. That’s why it’s so important to have a strategy in place before you make an offer — I’m always happy to run the numbers with you. If you’re the one selling right now, a seller-paid rate buydown can be a much stronger draw for buyers than a straight price reduction. It’s worth talking through with your real estate broker, or reach out to me directly and I’m happy to help you think it through.
Let’s Talk About Your Scenario
If you have questions about your specific situation — whether you’re buying, refinancing, exploring a retirement mortgage, or just want to talk through your options — I’d love to hear from you.
This content is for informational purposes only and does not constitute a rate quote or lending commitment. Rates and market data referenced above are subject to change.
About Rhonda Porter
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