Mortgage Rates Continue To Weigh on Applications Following Fed Rate Hike

Mortgage applications fell again last week following a Federal Reserve interest rate hike that put a chill on the market, according to the Mortgage Bankers Association.

For the week ending Sept. 18, MBA's Market Composite Index—a measure of total mortgage loan application volume—fell 1.5% on a seasonally adjusted basis from one week earlier.

The seasonally adjusted Purchase Index, which measures the volume of mortgage applications to purchase a single-family home, decreased 1% from one week earlier. Purchase applications were down 11% from a year ago. The refinancing index also declined 3% for the week and was 62% lower than the same week one year ago.

"With this week’s decline, the pace of refinancing fell to its slowest pace since February 2025," said Mike Fratantoni, MBA’s senior vice president and chief economist.

Last Wednesday, the Federal Reserve voted unanimously to raise interest rates by a quarter-percentage point from 3.75% to 4%.

"The plain fact is that inflation is too high and has been for too long," Fed Chairman Kevin Warsh said following the vote. "The committee’s unanimous vote shows our resolve to achieve price stability on a timelier basis."

Last week, mortgage rates climbed to 6.95% per Freddie Mac, up from 6.76% the week before and 6.26% a year ago.

Fratantoni noted that as fixed rates have climbed, more borrowers opted for adjustable-rate mortgages. The share of adjustable-rate mortgage applications climbed to 9.8%.

Meanwhile, the share of FHA loan applications fell to 16.7% from 16.9% the prior week. The VA share of total applications decreased to 12% from 12.4% the prior week. The USDA share of total applications increased to 0.6% from 0.4% the week prior.

How mortgage rates are calculated

Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.

The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.

That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.

Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.