The Federal Reserve just raised its benchmark rate for the first time since July 2023.
On September 16, the Fed voted to increase its target range for the federal funds rate by 0.25 percentage point, bringing it to 3.75%–4.00%. The new range took effect September 17. The Fed said inflation remains elevated and that the increase is intended to support a return toward its 2% inflation goal.
If you’re thinking about buying a home, your first question might be:
Does this mean mortgage rates just went up 0.25% too?
No. Mortgage rates don’t move one-for-one with the Fed.
And that’s an important distinction.
The Fed Doesn’t Set Mortgage Rates
The rate the Fed changed is the federal funds rate, a short-term interest rate that influences borrowing costs throughout the economy.
Mortgage rates have their own moving parts.
Inflation, jobs data, economic growth, the bond market, and expectations about what the Fed may do next can all play a role. Thirty-year mortgage rates also tend to move with longer-term Treasury yields, especially the 10-year Treasury.
If you want a deeper look at why mortgage rates can move differently from the Fed, I broke down the 10-year Treasury and mortgage spreads earlier this year.
So when the Fed raises its rate by 0.25%, your mortgage lender doesn’t simply add 0.25% to your rate.
Sometimes the mortgage market has already moved before the Fed makes its announcement.
And that’s pretty close to what we saw this month.
Mortgage Rates Were Already Moving Higher
Mortgage rates had been climbing heading into the Fed meeting.
Freddie Mac reported that the average 30-year fixed mortgage rate reached 6.95% on September 17, up from 6.76% the week before and 6.71% at the beginning of the month.
HousingWire was also seeing higher rates before the Fed decision. Its data showed 30-year conforming mortgage rates averaging 7.28% on September 15 as Treasury yields approached 5%. Different rate trackers use different methods, so their exact numbers won’t always match.
The larger point for buyers is simple: borrowing had already become more expensive before the Fed announced its increase.
What Does That Mean for Your Buying Power?
Even a relatively small change in your mortgage rate can change your monthly payment.
And when the payment changes, the price range that feels comfortable can change with it.
Lower mortgage rates can give buyers more purchasing power, while higher rates can reduce it. Your actual rate will still depend on things like your credit, down payment, loan type, and the lender you choose.
So if you were pre-approved a few weeks ago, this is a good time to check in with your lender.
Ask what your payment would look like today.
That number is much more useful than the national average when you’re deciding what you can comfortably afford.
Should Buyers Wait for Rates to Come Back Down?
This is where trying to time the market gets difficult.
No one knows exactly where mortgage rates will go next.
They can react to inflation reports, employment numbers, Treasury yields, global events, and what investors expect the Fed to do at future meetings.
We saw that same relationship play out earlier this year when inflation and energy prices pushed mortgage rates back up.
Recent mortgage-market data shows just how quickly things can change. The 30-year Freddie Mac average moved from 6.71% on September 3 to 6.95% just two weeks later.
So instead of building a home search around a rate you hope might appear later, I’d start with:
What can I comfortably afford with the financing available to me today?
If the home, payment, and timing make sense for you, then you have something concrete to evaluate.
If rates eventually come down, refinancing may become an option depending on your situation. I wouldn’t make a purchase assuming that will happen on a specific timeline.
What About Sellers?
Higher borrowing costs matter to sellers too.
When a buyer’s monthly payment increases, that buyer may lower their price range or become more selective about the home they’re willing to purchase.
That puts even more attention on pricing.
A home that compares well with the competition can still get attention from serious buyers. A home that feels overpriced can be easier to pass over when buyers are already watching every part of their monthly payment.
For sellers, I’d pay attention to what similar homes are actually selling for, how long they’re sitting, and what buyers have to choose from right now.
You can see how those trends are playing out locally in my latest Southwest Colorado market recap.
What I’d Do If I Were Buying Right Now
I’d start with the lender.
Ask:
What rate do I actually qualify for today?
What does that make my monthly payment?
Has my buying power changed since I was pre-approved?
Would paying points make sense for me?
Are there any seller-paid or temporary rate buydown options worth considering?
If I’m already under contract, what are my rate-lock options?
Then build the home search around a payment you’re genuinely comfortable with.
That gives you a much clearer plan than trying to guess what the Fed will do next.
The Bottom Line
The Fed raised its benchmark rate by 0.25 percentage point, and mortgage rates were already moving higher around the same time.
For buyers, the most important thing to remember is that the federal funds rate and your mortgage rate are different rates.
What matters to your home search is the financing you can actually get, the monthly payment that comes with it, and whether that payment works for you.
For sellers, borrowing costs are another piece of the affordability picture buyers are weighing when they decide what a home is worth to them.
If you’re thinking about buying or selling in Southwest Colorado and wondering how the latest rate move affects your plans, reach out anytime. I’m always happy to talk through what we’re seeing locally.
Sources: Federal Reserve, Freddie Mac, HousingWire, and September 2026 mortgage-market reporting.
