Mortgage rates remain above 7% as markets anticipate further Federal Reserve rate hikes to combat inflation, while a recent bond-market sell-off has intensified pressure. The average 30-year fixed-rate mortgage climbed 10 basis points to 7.12% APR for the week ending September 24, according to Zillow data provided to NerdWallet. The Fed raised its benchmark rate by 25 basis points last week, signaling more hikes could come before year-end. The 10-year Treasury yield, a key mortgage benchmark, reached its highest point since 2007.
Inflation shows no sign of abating, affecting everything from groceries to gasoline. While rising rates complicate homebuying, strategic planning can help. A Realtor.com study analyzing rate swings since 2000 suggests a budgeting buffer: plan for a half-point change within three months, three-quarters of a point at six months, and a full percentage point a year out. This keeps you on budget about 80% of the time. Always stress-test your budget at the higher rate; if rates are near 7% now, ensure affordability at 8%.
Use an online calculator to gauge affordability at both ends of your rate window, and compare offers from at least three lenders before locking.
Fall offers distinct advantages: typical home prices drop about 5% in October and November compared to June, with less competition and more negotiating leverage. Inventory rose to a 4.9-month supply in August—the highest in over a decade—giving buyers room to negotiate concessions. Consider asking for a lower price, seller-paid closing costs, or even having the seller buy discount points to lower your rate, or fund a temporary rate buydown. Tailor your request to your budget and local market.
Looking ahead, markets expect a 70% chance of a quarter-point Fed hike at the October 27-28 meeting, rising to over 94% by December for another 25- or 50-basis-point increase. While hikes can keep rates elevated, they aim to curb inflation, which may ultimately support your budget and push rates lower.
