Why Are Mortgage Rates Going Up?

Mortgage rates have been climbing through much of 2026, with borrowing costs in September at their highest level since November 2023. Mortgage rates are always in a state of flux, and if you're house-hunting, refinancing, or simply tracking trends, each upward move can bring uncertainty about what to do next.

While a common misconception is that the Federal Reserve sets mortgage rates, rates are actually determined by a number of factors. Here, we break down the biggest forces behind today's rate movements, how those changes translate into your monthly payment, and what options you have when rates stay high.

How rising mortgage rates affect your monthly payment

Mortgage rate movements can seem small, but they add up fast for your monthly payment. If you’re looking at a $320,000, 30-year mortgage, a fixed rate of 6% saves you $104 a month compared to a rate of 6.5% on the same loan. When the interest rate rises to 7.5%, you're spending $318 more a month compared to a 6% rate, and $214 more than a 6.5% rate.

Are sellers affected by rising mortgage rates?

Sellers are impacted by rising rates, too, just from the other direction. As borrowing costs climb, the pool of home buyers who can comfortably afford a home shrinks, which tends to cool demand and slow the pace of price growth. 

What causes mortgage rates to go up?

Mortgage rates rarely rise for just one reason. Usually, a mix of economic and market forces drives them up, from inflation and bond yields to global events and Federal Reserve policy.

Rising inflation

Higher inflation is one of the biggest drivers of higher mortgage rates. Because loans can span up to 30 years, lenders build in a higher rate upfront when they expect inflation to erode the value of future repayments.

The 2026 inflation story is a clear example. Prices have been elevated for much of the year, with the most recent Consumer Price Index (CPI) reading showing an increase of 3.7% year-over-year in September. Meanwhile, mortgage rates are at their highest level since November 2023, according to Zillow’s September 2026 Market Report.

Climbing 10-year Treasury yields

When investors sell Treasury bonds, the bond prices fall and yields rise, often pulling mortgage rates up with them. Investor sentiment about inflation risk, economic strength, and government borrowing all move the 10-year Treasury yield from day to day.

The 10-year Treasury yield has been trending up in 2026, at about 5.0% as of mid-October in response to surging oil prices and a higher inflation rate. Mortgage rates have followed suit, now up to about 7.5%, according to Zillow data.

A strong economy

It sounds backward, but good economic news can send mortgage rates higher. That's because a strong economy, marked by healthy hiring and robust consumer spending, can put upward pressure on prices. When inflation creeps up, lenders have to price that into the rate they charge, since they're committing to a loan that won't be fully repaid for decades.

A resilient job market also gives the Fed less reason to cut its benchmark rate, and in some cases, reason to raise it. When the economy is running hot, the Fed may increase the federal funds rate to cool inflation, or simply hold it higher for longer. Either way, that can keep borrowing costs elevated across the board. Taken together, home buyers and refinancers may face steeper mortgage rates even when the broader economy looks healthy.

Federal Reserve policy signals

The Federal Reserve sometimes uses “forward guidance” to hint at future policy decisions, which can move markets today, without the Fed lifting a finger. Bond investors don’t wait for a rate change to actually happen; they trade on what they expect to happen next.

That’s exactly what played out in the lead-up to the Fed’s September 2026 meeting, when policymakers increased the benchmark federal funds rate. Mortgage rates were already well on their way up, even before the announcement.

Geopolitical events and oil prices

Geopolitical instability of any kind can move mortgage rates, not just conflicts in oil-producing regions. When uncertainty spikes — whether from a war, trade disputes, or diplomatic tensions — inflation expectations can shift and bond markets react. The result can be higher yields and, in turn, higher mortgage rates.

Widening mortgage spread

The “spread” is the gap between the 10-year Treasury yield and 30-year mortgage rate. Historically, it’s averaged around 1.7%, but it widens when markets are volatile or lenders feel less certain about the future. This can push mortgage rates higher, even when Treasury yields haven’t moved much.

That describes what happened in 2022 and 2023, when spreads blew out well past their historical norm, and it’s still relevant today. A wider spread adds a premium on top of what the bond market alone would suggest.

What causes mortgage rates to go down?

The same forces work in reverse. Here’s what tends to bring mortgage rates down:

Cooling inflation

Softer-than-expected inflation reports tend to ease bond yields almost immediately. That’s why the monthly Consumer Price Index and Personal Consumption Expenditures reports get so much attention from anyone tracking rates: A single data point can move markets.

Cooling inflation tends to be the most reliable and lasting driver of lower mortgage rates, more so than any temporary market move or Fed signal. Earlier this year was a clear example: As inflation expectations eased in February, the 10-year Treasury yield slid toward 4%, and the 30-year fixed mortgage rate fell.

Market instability

In times of international instability or market volatility abroad, investors want a safe place to park money, so they gravitate to U.S. Treasury bonds. That surge in demand pushes bond prices up and yields down, which pulls mortgage rates lower.

Economic slowdowns or recession fears

Bad economic news also drives down mortgage rates. When investors worry about a slowdown, they often move money into safer Treasury bonds. That buying pressure pushes bond prices up and yields down.

Federal Reserve rate cuts

A Fed rate cut on its own doesn’t guarantee that mortgage rates drop. What matters more is the signal it sends about where policy is headed next. If bond investors sense the Fed is entering a cutting cycle, they’ll move to Treasurys — again, demand that pushes yields down. That often happens well before any cuts are announced.

Why mortgage rates don’t always respond to the Fed

It’s one of the most common points of confusion for anyone watching mortgage rates: The Fed cuts its benchmark rate, but mortgage rates don’t move, or even increase. Here’s why that happens:

1. Bond markets trade on expectations

Bond markets do not trade on announcements or press conferences. By the time the Fed announces its rate decision, investors have typically already adjusted their positions based on what they expected the Fed to do — sometimes weeks or months in advance. If the cut matches what the market had already priced in, there’s little left to react to. Mortgage rates tend to move when the Fed does something markets didn’t already anticipate.

2. The Fed only controls one end of the curve

A Fed rate cut lowers the cost of overnight (short-term) borrowing between banks; it doesn’t outright set bond prices or yields. If inflation is still running hot or the economy looks resilient, the 10-year Treasury yield can hold steady or even rise while short-term rates fall.

3. Investors demand more for long-term debt

When someone buys a 10-year Treasury bond, they're locking up their money for a decade. The longer the commitment, the more return they expect, to help account for inflation uncertainty, shifting economic conditions, and the sheer risk of the unknown. When investors start demanding more return for that long-term commitment, the 10-year Treasury yield rises, and mortgage rates rise with it. That can happen completely independent of what the Fed does with short-term rates.

How all three come together. All three of these came together in late 2024. The Fed cut its benchmark rate three times, yet the 30-year fixed mortgage rate ended the year higher than it began. The reason: Mortgage rates follow long-term bond yields, not the Fed’s short-term rate. Over that same period, persistent inflation and investors demanding higher returns pushed the 10-year Treasury yield up — more than enough to outweigh the Fed’s cuts.

What’s happening with mortgage rates right now?

As of October 2026, the daily 30-year fixed mortgage rate sits above 7%, its highest level in three years, according to Zillow data.

Here's what's shaping the current environment:

• What pushed rates up in the first half of the year: Geopolitical tensions in the Middle East drove oil prices higher and stoked inflation, pushing mortgage rates up in spring.
• What sent rates higher again mid-year: A fresh oil price shock in mid-summer stoked renewed inflation worries and pushed mortgage rates even higher, just as July's inflation reading showed inflation cooling to 3.4% year-over-year. The spike may have prompted many home shoppers to pause their search.
• What's keeping rates elevated: The inflation picture is now worse, with the September reading at 3.7%. Amid that and the ongoing war in Iran, the Federal Reserve raised rates in September.

Zillow's September 2026 forecast calls for existing home sales to slow 3.5% year-over-year in the fourth quarter, a result of heightened mortgage rates. That outlook is a stark departure from the beginning of 2026, Chief Economist Mischa Fisher says, when the projections were more optimistic prior to the war.

What can I do when mortgage rates are high?

A high mortgage rate doesn’t mean you’re out of options. You can shop multiple lenders to compare offers, buy down your rate to lower your payments, or improve your credit score to improve your odds of qualifying for a lower rate. Depending on your situation, you may even consider an adjustable-rate mortgage, which often has lower initial rates for a fixed period, and then refinance before that period ends.

Shop multiple lenders

Mortgage lenders often quote different rates (even for the same home loan) because each company is applying their own unique standards based on their business needs. One lender may have higher operating costs and therefore quote you a higher rate to account for those costs. Another lender may be applying slightly different risk rules when assessing your mortgage application, leading to a higher rate. 

Comparing Loan Estimates from at least three different lenders is an easy way to compare rates and terms to find the best option for you. As long as you apply to each lender within a 45 day window, you’ll only receive one credit pull impact. 

Buy down your rate with points

Mortgage points allow you to lower your interest rate for a fee. Generally, one point costs 1% of your loan amount and typically buys down your rate by a quarter of a percentage point. (The exact math varies by lender.) 

To determine whether you should buy down your rate, you’ll need to decide how long you’ll hold the loan. You want to recoup the upfront cost by reaching a breaking even point, which is the point in time when the total savings from the lower rate equals the initial upfront costs paid. 

To calculate the breakeven point, divide your total upfront costs by your monthly payment savings. You can use Zillow’s Closing Cost Calculator to estimate your cash to close with and without points.

Improve your credit score

Unlike bond yields or inflation, your credit score is something you can control before you apply for a mortgage. An improvement to your credit score could knock percentage points off your rate. 

In the months leading up to your mortgage application, be sure to pay every bill on time, keep balances well below your credit limits, and avoid opening new credit accounts to improve your credit score.

Consider an adjustable-rate mortgage (ARM)

An adjustable-rate mortgage (ARM) trades a lower rate in the early years for the possibility of higher rate after the fixed period ends. The rate stays fixed for an initial stretch, typically 3, 5, 7, or 10 years, then adjusts every six months after that. 

For buyers who know they’re likely to move or refinance within that window, the lower starting rate can mean real savings without taking on much of the risk that comes with a longer adjustable period. 

For example, on a typical U.S. home valued at about $370,000 with 20% down, a 30-year ARM with a 5.5% starting rate would have a monthly payment of about $1,680 to start, compared with $1,920 for a 30-year fixed mortgage at 6.75%. That's a savings of $240 per month during the initial ARM period.

Consider waiting, but understand the math

Waiting for a lower rate is a reasonable instinct. Just know, rates and home prices can always change. 

Say you're looking at a $370,000 home with 20% down. If home prices rise 4% while you wait for rates to drop from 6.75% to 6.5%, your monthly payment would actually be about $26 higher, roughly $9,000 more over the life of the loan, even with the lower rate. 

Rather than waiting for rates to hit their absolute lowest point, it usually makes more sense to move forward once a rate works for your budget and plans. Zillow’s mortgage rate reports reveals the latest trends to help you stay informed.

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*Zillow Home Loans; an equal housing lender. NMLS #10287

Disclaimer: This article is provided for general informational purposes only and is not intended to be financial, legal, tax, or other professional advice. Your circumstances may differ, so please consult a qualified financial, legal, tax, or other professional adviser before making decisions based on your individual circumstances.