Welcome to this month’s Mortgage Market Moment.

 

When I sit down each month to write this market update, I usually try to find a little humor, a personal observation, or a good story to ease us into the numbers.

 

Not this month – I’m not sure there’s a clever story or funny opening that can soften what happened in September.

 

Mortgage rates went up. And they went up quickly.

After spending much of the summer in the mid-6% range, mortgage rates made an unwelcome trip above 7% in September.

Freddie Mac’s weekly mortgage rate survey shows:

  • Aug 27:           6.66%
  • Sept 3:            6.71%
  • Sept.10:          6.76%
  • Sept.17:          6.95%
  • Sept 24:          7.03% 

Why did rates move up so quickly?

Good question. The short answer… A lot of things happened at once.

Inflation is still hanging around, energy prices moved higher, the economy has remained stronger than many expected, and the Federal Reserve acted by increasing the Fed Funds rate. All of that made investors jumpy and less confident that interest rates would come down anytime soon. With a lack of market clarity, investors demand a higher return for their investment, and that demand for a higher return – or yield – is what drives up the rates every day Americans pay, including for mortgages.

 

So, who are these “Investors” messing with our rates?

When we say “investors,” we’re not talking about people buying houses to flip or rent. We’re talking about the large institutions and individuals who buy US Treasury Bonds – like banks, insurance companies, retirement funds, mutual funds, and other large investment organizations.

 

OK, rates moved up. Now what?

With mortgage rates hanging out around 7%, we might need to change the question. Stop asking, “When will rates come back down?” A more realistic question may be, “What can I control to make my monthly mortgage payment work for me today?”

This question may need to change because, truth be told, none of us has a magic wand to control mortgage rates. The Federal Reserve doesn’t even directly set mortgage rates. The economy, inflation, bond yields, those pesky “investors”, and a whole list of other things we can’t control all play a major role in mortgage rate movement.

 

So, let’s consider these 5 things that are controllable.

 

# 1 – Start with the Payment, not the home price

One of the biggest mistakes buyers can make is starting with, “How much house can I afford?”

Flip that question around and start with, “What monthly payment am I comfortable with?”

Once you know that number, your lender can work backward and help you figure out the price range, down payment, and loan options that make financial sense for you.

That approach can keep you from falling in love with a house that falls outside your monthly house payment comfort zone.

 

# 2 – Your Down Payment Is a Tool

A larger down payment isn’t always the right answer, but it’s worth looking at the math.

Putting more money down for your mortgage could reduce your loan amount and monthly principal and interest payment. Depending on the loan, it could also affect paying costly private mortgage insurance.

The goal shouldn’t be to put down the biggest down payment possible. It’s to find the combination that makes the most sense for your overall financial picture.  And guess what? Your mortgage lender can help you sort all of that out.

 

# 3 – Ask About Buying Down the Rate

This is one area worth discussing with your mortgage lender.

Depending on the situation, you may be able to pay discount points to lower your interest rate. A seller may also be willing to contribute toward a rate buydown or closing costs.

There isn’t a one-size-fits-all answer here. Sometimes paying more upfront to get a lower rate makes sense. Sometimes it doesn’t. Again, your lender can help you look at all of your options.

 

# 4 – Don’t Dismiss an Adjustable-Rate Mortgage

Not everyone has money for a larger down payment or to pay points to buy down their interest rate. An adjustable-rate loan may be a reasonable option to get a lower rate.

I know. The words “adjustable-rate mortgage or ARM” can cause anxiety. An ARM isn’t automatically a bad loan. For the right borrower, particularly someone who doesn’t expect to own the home for decades, an ARM may offer a lower initial rate and monthly payment. 

Consider a common 5/1 ARM loan for a minute… A 5/1 ARM offers a lower initial rate that is fixed for 5 years, and the rate CANNOT change during those first 5 years. Then after that 5-year fixed period, the loan’s rate can adjust every year or every six months thereafter.

It’s another tool worth putting on the table and at least discussing with your lender. Don’t simply reject the idea of an adjustable-rate loan without looking at the numbers. Just make sure you understand how they work.

 

# 5 – Shop Around

Higher rates make every dollar in the monthly payment even more important.

Take homeowners insurance for an example. Insurance premiums have increased dramatically in many parts of the country over the last several years. Companies, coverage options, and premiums can vary, so shopping around for the right coverage at a competitive price can make a meaningful difference in your total monthly mortgage payment.

The same advice applies to your mortgage loan.

Don’t just look at the interest rate. Look at the entire loan. Ask about closing costs, fees, loan options, and the total monthly payment. The lowest advertised rate isn’t always the lowest-cost loan. I encourage borrowers to shop around and get a written Loan Estimate or LE to help you compare lenders.

 

BY THE NUMBERS – SEPTEMBER 2026

7.03% – Average 30-year mortgage rate at the end of September.

20.8% – Share of homes with a price reduction in September – the highest September level since 2018.

+5.4% – Increase in active homes for sale inventory compared with September 2025.

 

Takeaways

So, what should we take away from September?

Mortgage rates went up. That’s not the news any homebuyer wanted to hear. But the story isn’t all bad.

Buyers have more homes to choose from, and prices on many of those homes have come down. That’s good. Sellers are more motivated than they have been in years, and many are willing to negotiate and help make a deal work. That’s good, too.

And while rates may be higher, there are still different ways to structure a mortgage that can make the monthly payment work for the right buyer.

Here’s the biggest thing I would take away from September: don’t let the interest rate be the only number you look at.

 

Disclosures: We are an Equal Housing Lender. NMLS # 635768. Rates are national averages and move daily; your rate will vary based on credit, loan type, occupancy, down payment, lock period, and market conditions. This is not a commitment to lend. All information is believed to be reliable but not guaranteed; please verify key figures that affect your decision. Always consult a financial advisor or lender before making major financial decisions.