Mortgage Rates at 7.40%: What the Fed Does in 11 Days

Mortgage rates are sitting at 7.40% for the second straight week, the highest since November 2023, and in 11 days the Fed meets again. Here is my answer up front: I do not expect the Fed to raise rates on October 28. I expect a hawkish Fed that tells you a hike is coming in December, and the bond market will price that in long before the vote. That means mortgage rates stay high, and I think they stay high through 2027. In this housing market update I walk through what 7.40% costs you every month, why the 10 year Treasury matters more than the Fed, where home prices are falling, what builders are doing about it, and the four reports that land before the Fed decision.

Where rates go next: my running mortgage rate forecast for 2027 is updated every month.

Why I say the Fed is about to break the back of housing

If you are looking for a home, trying to refinance, moving for a job, or finally retiring, I have to be honest with you. Good luck. Very few people can pay all cash for a median home. For the other 99.9% of us, the next 11 days matter.

Here is what I expect on October 28. The Fed holds. But the message will be hawkish, and they will most likely signal a rate hike in December. The damage does not come from the vote that day. It comes from the bond market front running the next move six weeks early, and that shows up in your mortgage rate right away.

I also want to be clear about inflation. I do not see an off ramp. I think inflation stays above 2% for probably the next two years, and only after that do I see demand destruction bringing it down. That is down the road. Right now the number is 7.40%.

Mortgage rates at 7.40%: eight straight weeks above 7%

The Freddie Mac 30 year fixed rate was 7.40% as of October 15, 2026, the same as the week before. That is eight straight weeks above 7% and the highest since November 2023. The weekly path on my chart tells the story: 6.66% on August 27, 6.71%, 6.76%, 6.95%, 7.03%, 7.28%, and then 7.40% twice. A year ago it was 6.27%. The 15 year is 6.71%.

I have a lot of money in real estate, so I follow this every day. I had properties I wanted to refinance in the fives. There was one moment at 5.99% where I could have done it, and I held out for about 10 more basis points. I did not get them. Now I am stuck with a 6.9% mortgage on a 20 year loan, which is normally cheaper than a 30 year to begin with. I waited and now I am paying for it.

It is the bond market, not just the Fed

The Fed raised its rate to a range of 3.75% to 4.00% on September 16, the first hike in three years, on a unanimous 12 to 0 vote. The statement said inflation remains elevated, and they are looking for more. I do not think it is the last hike.

But your 30 year mortgage is priced off the 10 year Treasury, not the Fed funds rate. My simple rule, which I explain in how mortgage rates are set, is to take the 10 year yield and add about 2%, roughly 200 basis points for the lender spread. The 10 year was 5.32% on October 5, the highest since 2002, and closed at 5.08% on October 16. Add 2% and you land right around 7.4%. Some lenders are a little higher, some a little lower, so shop around.

Why are bond buyers demanding more yield? One signal I watch is ISM Services Prices Paid, which came in at 74.0 for September, the highest since July 2022. Add heavy government spending on top of hot prices and all I see is more pressure on rates.

What 7.40% really costs you

Take the September median existing home at $417,500 with 20% down. That is a $334,000 loan over 30 years, principal and interest only, no taxes or insurance. A year ago at 6.27%, that payment was about $2,061 a month. Today at 7.40% it is about $2,313. That is $252 more every month and $3,020 more every year.

People say $252 is not that much. It is 360 payments. Multiply it out and the extra interest over the life of the loan is roughly $90,600. That is the real cost of the last 12 months.

Home sales are stuck under 4 million

September existing home sales ran at a 3.99 million annual pace. That is up 1.5% from August, which was revised to 3.93 million, and down 2.2% from a year ago. Most of those deals were signed before rates broke 7%, so the October and November numbers are the ones to watch. As rates climb, people either step back or find that the house they thought they could afford is gone.

First time buyers were 31% of sales. All cash buyers were 27%. Investors and second home buyers were 20%. Median days on market was 33, which is still not bad. NAR’s Lawrence Yun said buyers are thinning out and sales could be down if rates stay well above 7%.

Home prices: still up, but barely

The September median existing home price was $417,500, up 1.3% from a year ago. That is the 39th straight month of annual gains. More than three years where every single month the price of a home was higher than the year before. It depends a lot on what part of the country you are in, though.

The July Case Shiller numbers show it. Chicago led with a 6.9% yearly gain. New York was up 5.8%. My town of Cleveland was up 4.2%, and I can see why. The 10 city index was up 3.4%, the 20 city index up 2.5%, and the national index up 1.9%.

Now the drops. Six of 19 metros were down in July: Dallas, Denver, Las Vegas, Portland, Seattle and Tampa. The biggest were Seattle down 1.6%, Las Vegas down 1.3% and Denver down 1.1%. The West was the only region with a lower median in September.

The supply problem is gone

There were 1.60 million homes for sale in September, the most since November 2019. That is 4.8 months of supply, and August hit 4.9 months, the highest in over a decade. Inventory is up 4.6% from a year ago and up 1.9% from August. Lawrence Yun put it plainly: supply is not really an issue anymore. The problem now is demand, and demand is what high rates kill.

Builders are blinking

NAHB builder confidence for September came in at 32. That ties the lowest in over three years, and anything under 50 means more builders see poor conditions than good. 38% of builders are cutting prices, with an average cut of 6%, and 66% are using sales incentives. I have seen builders near my properties offering $25,000 signing bonuses. Four years ago people were knocking down the builders’ doors. Now the builders have to knock on yours.

Here is the part that surprised me. New homes are now cheaper than existing homes. The August new home median was $393,700 against the $417,500 existing median in September. The new home median is down 5.8% in a year. Builders are making it cheaper to buy new, and that changes the math for anyone shopping right now.

Housing stocks are getting crushed

Here is how the housing names have done from January 2 through the October 16 close. Zillow is down 53.2%. Rocket is down 45.8%. Lennar is down 26.0%. The homebuilder ETF, ITB, is down 11.4%. PulteGroup is down 4.6% and D.R. Horton is down 4.3%. Over the same stretch the S&P 500 is up 11.7%, so housing is lagging the whole market.

ITB peaked at $113.57 on February 13 and closed Friday at $86.40, about 24% off its high and down 9.7% since late August when rates started climbing. If rates stay high and inflation picks back up, I expect these names to keep getting hit, and I do not see what changes that.

Cracks to watch: foreclosures and applications

There were 227,548 foreclosure filings in the first half of 2026, up 21% from a year earlier, and foreclosure starts were up 18%. Bank repossessions were 27,983, up 33% in a year, but still 26% below the first half of 2020. This is rising, not 2008.

Mortgage applications fell 2.7% in the MBA week ending October 9, with the average contract rate at 7.50%, up 108 basis points in a year. Investors were 20% of buyers, up from 15% in August. Cash buyers and investors are filling the gap first time buyers left, and they can only do that for so long.

The forecasts just got rewritten

In September, Fannie Mae’s forecast had the 30 year rate at 6.8% for the fourth quarter of 2026 and 6.7% for the 2027 average. One month later the October outlook says 7.4% and 7.5%, with 7.5% every quarter of 2027. Refi volume for 2027 was cut to $430 billion from $802 billion, and Fannie no longer sees a refi wave next year. That is bad news for the companies that live on refinancing. When the refi wave finally comes, some of the stocks getting beaten up now will rally hard, but we are not there yet.

The MBA sees the 10 year near 5% through 2027. Remember my rule and add 2%. For anyone waiting for a 4% or 5% mortgage, I do not think you are getting it. I think 7% to 8% is the range for all of 2027. Do not get mad at me, I am just telling you what I see.

The 11 day countdown to the Fed

Monday, October 19: NAHB builder confidence, consensus 31 against 32 last month. Tuesday, October 20: September housing starts, with Wells Fargo looking for 1.25 million. Thursday, October 22: the Freddie Mac rate, and whether 7.40% finally cracks. Tuesday, October 27: Case Shiller for August, and whether more metros turn negative. Wednesday, October 28: the Fed decision. Hike, hold, or signal. That meeting sets the tone for the rest of the year.

My playbook for buyers, sellers and watchers

If you are buying, shop new builds. With 38% of builders cutting prices and the most supply in a decade, you can negotiate. Ask for a rate buydown instead of a price cut, because the lower rate helps you every month for years.

If you are selling, price it right the first time. Days on market are rising, and this is becoming a buyer’s market. List high and the house sits, the willing buyers move on, and they do not come back. This is not 2022. Out West, expect pushback on price. Investors and cash buyers are your best bid.

If you are watching, the 10 year is the tell for mortgage rates. ITB is near 24% off its high and very rate sensitive. And October 28 sets the tone for year end.

Common questions

Will the Fed raise rates on October 28, 2026?

My expectation is no hike that day but a hawkish statement that points to a December hike. The bond market will price that in early, so mortgage rates can rise before the Fed ever votes.

Why are mortgage rates going up if the Fed only raised once?

Mortgage rates follow the 10 year Treasury plus a lender spread of about 2%. With the 10 year above 5%, you get rates around 7.4%, no matter what the Fed does at a single meeting.

How much more does a 7.40% mortgage cost than 6.27%?

On a $334,000 loan over 30 years, about $252 more per month, $3,020 more per year, and roughly $90,600 more interest over the life of the loan.

Are home prices falling in 2026?

Nationally, no. The September median was $417,500, up 1.3% from a year ago. But six of 19 major metros were down in July, led by Seattle, Las Vegas and Denver, and the West was the only region with a lower median in September.

Will mortgage rates drop in 2027?

Fannie Mae now forecasts 7.5% every quarter of 2027 and the MBA sees the 10 year near 5% through next year. My own view is 7% to 8% for all of 2027.

Keep reading on Stock Moe

• How Does Kalshi Work? Your First $25 Contract, Step by Step
• Mortgage Rates Hit 7.50%: 54 Cities Falling, No Crash Yet
• My 10 Year Mortgage Rate Forecast: 6.6% in 2027, 6.1% by 2031

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Sources

• Freddie Mac Primary Mortgage Market Survey, October 15, 2026
• Federal Reserve FOMC statement, September 16, 2026
• US Treasury 10 year yield, closes of October 5 and October 16, 2026
• ISM Services PMI, Prices Paid index, September 2026
• National Association of Realtors existing home sales and inventory, September 2026
• S&P Cotality Case Shiller Home Price Indices, July 2026
• NAHB/Wells Fargo Housing Market Index, September 2026, and Census Bureau new home sales, August 2026
• ATTOM midyear 2026 foreclosure report
• Mortgage Bankers Association weekly applications survey, week ending October 9, 2026
• Fannie Mae Economic and Housing Outlook, October 2026, and MBA forecast
• Stock closing prices, January 2 to October 16, 2026

I am not a financial advisor and nothing in this article is financial advice. Everything here is my own opinion, for educational and entertainment purposes only. Do your own research and talk to a licensed professional before you make any financial decision.