Mortgage rates had decreased or held steady for nine straight weeks, but they’ve now increased for the second week in a row. In September, the Federal Reserve lowered its rate for the first time in 2025, and while people may have expected that cut to push rates farther down, the opposite has happened.
Are mortgage rates dropping?
As of Oct. 2, Freddie Mac reported that rates for 30-year fixed-rate mortgages were 6.34%. The 30-year rate is also 22 basis points higher than it was this time last year. In early Oct. 2024, mortgage rates were averaging 6.12%.
This week’s 15-year fixed mortgage rate is up six basis points to 5.55%, which is 30 basis points higher than this time last year.
In situations like these, it pays to look at the numbers. Here’s the Freddie Mac data on mortgage rates for the past 52 weeks as of Oct. 2, 2025:
- 30-year fixed-rate mortgage: 6.12% to 7.04%
- 15-year fixed-rate mortgage: 5.25% to 6.27%
If you just go by the numbers, rates on mortgage rates are hovering between the highs and lows of the last 12 months
Will mortgage rates go down this year?
Now that the Federal Reserve has lowered the fed funds rate, why have mortgage rates ticked up? This is actually very similar to what happened last year when the Fed slashed its rate for the first time.
The latest from the Federal Reserve
When the Fed — the common nickname for the Federal Open Market Committee (FOMC) — held its Sept. 2025 meeting, it voted to lower the federal funds rate by 25 basis points. The central bank had cut its rate three times at the end of 2024, but this was the first slash of 2025.
That federal funds rate tends to directly influence rates on shorter-term lending. While mortgage rates aren’t directly based on the fed funds rate, they typically mirror fed fund rate trends. So, if the fed funds rate goes down, mortgage rates will likely follow. The inverse is also true.
When people anticipate a fed funds rate cut, mortgage rates usually fall in the weeks leading up to the meeting. However, home loan rates don’t necessarily continue to decrease after a fed funds rate cut.
In 2024, mortgage rates plummeted throughout August and early September as people expected the Fed to lower its rate at the bank’s September meeting. But mortgage rates stopped decreasing significantly after this meeting — and after the two additional rate cuts later that year.
The same seems to have happened in 2025. Mortgage rates gradually declined in the weeks leading up to the September meeting when people expected the Fed to lower its rate, and even though the fed funds rate did go down, mortgage rates bounced back up.
The latest on 10-year Treasury yields
While short-term lending rates closely follow the fed funds rate, mortgage rates more closely follow the 10-year Treasury yield. As of Sept. 30, the 10-year Treasury yield sat at 4.16% — up from 3.81% a year prior. You’re probably wondering why mortgage rates aren’t 4%, right?
Lenders add a “spread” to the 10-year Treasury yield. The spread is simply the difference between the rates consumers pay and the rate on the 10-year Treasury. Without getting too much into the weeds, charging a spread helps mortgage lenders cover costs associated with making loans to the public and the risk of providing such loans.
For example, the current average 30-year fixed mortgage rate is 6.34%, and the 10-year Treasury yield is 4.16% — a spread of 2.18%. The 10-year yield has also increased since the Fed meeting, so it makes sense that mortgage rates are also going up.
How soon will mortgage interest rates go down?
Expert opinions differ on what mortgage rates will do over the next year or so. The Mortgage Bankers Association (MBA) predicted in its September forecast that the 30-year fixed rate would hit 6.5% by the end of 2025 and 6.4% in Q4 2026. However, the September Fannie Mae Housing Forecast was more optimistic. Fannie Mae predicted that rates will go down to 5.9% by the end of next year. Both forecasts put have rates above 6% throughout 2025, though.
Is 7% a high mortgage rate?
Compared to historical mortgage rates, 7% isn’t considered a high rate. While it might be high compared to pandemic-era rates that were sub-3%, it’s on par with mortgage rates in the 1990s, and considerably lower than the double-digit rates seen in the late 1970s and early 1980s.
