On Wednesday, September 16, 2026, the Federal Open Market Committee voted 12 to 0 to raise the target range for the federal funds rate by a quarter point, to 3.75 percent to 4 percent. It was the Fed's first increase since 2023. The Committee's statement was direct about why: "Inflation remains elevated."
Mortgage rates were already climbing. Freddie Mac's Primary Mortgage Market Survey put the 30-year fixed at 6.95 percent on September 17, up from 6.76 percent the week before. One week later, on September 24, it averaged 7.03 percent, the first time the survey has been above 7 percent since January 2025. A year ago it was 6.30 percent.
I want to be straight with you about what that means, because the headlines this week are doing a lot of shouting and not much explaining.
Does the Fed set mortgage rates?
No, and this is the part almost everyone gets backwards. The Fed sets an overnight rate that banks charge each other. That rate drives credit cards, auto loans, and home equity lines of credit fairly directly.
Your 30-year fixed rate tracks the 10-year Treasury yield and the mortgage-backed securities market. Those move on inflation expectations and the long-term economic outlook, and the bond market usually prices in a Fed move well before the meeting happens.
That is why you will sometimes see the Fed cut and mortgage rates rise, or the Fed hold and mortgage rates fall. The two are related, but they are not the same instrument. So when you read "the Fed raised rates," the accurate translation is not "mortgage rates went up today because of this." It is closer to "the inflation picture that has been pushing long-term rates up is still there, and the Fed just confirmed it."
What actually changed for homebuyers?
Here is the honest version. Money costs more than it did a year ago. On a $500,000 loan, principal and interest at 6.30 percent is about $3,095 a month. At 7.03 percent it is about $3,337. That is roughly $240 a month, and it shows up in what you qualify for. You can see how that plays out on your own numbers with our buying power tool.
That is real, and I am not going to talk you out of feeling it.
But here is what did not change: the amount of housing you need, the rent you are paying while you decide, and the fact that a fixed-rate mortgage payment stops rising while rent does not.
And markets did not stop moving. California's statewide median price in August was $901,420, up 1.6 percent from July and slightly above August of last year, according to the California Association of Realtors, even with higher rates. In New Jersey, the statewide median sales price in August was $575,000, up 2.7 percent from a year earlier, and inventory rose 9 percent to 21,580 homes for sale, according to New Jersey Realtors. More homes to choose from, and prices that are still rising. If you are shopping in either state, our Sacramento and New Jersey pages break down the local picture.
Neither state is waiting for you to feel ready.
What lowers a mortgage payment when rates are higher?
When rates are higher, timing stops being the useful lever. These three are, and most buyers have never had them laid out plainly.
Lever one: a rate buydown
A buydown uses funds at closing to lower your interest rate, either for the first years of the loan or permanently. A temporary buydown, like a 2-1, reduces your rate by two points in year one and one point in year two before settling at the note rate. A permanent buydown lowers it for the life of the loan. Which one fits depends on how long you plan to hold the loan, and those are very different answers for a five-year holder than a thirty-year holder. Our 2-1 vs permanent buydown comparison walks through the math.
Lever two: seller credits
In a market where homes sit longer, sellers are often more willing to contribute toward closing costs or a buydown than to cut the price. That distinction matters more than it sounds. A $10,000 price cut changes your payment a little. Ten thousand dollars applied to a buydown can change it considerably more. Same money, different outcome. Allowable credit amounts vary by loan type, occupancy, and down payment, so this is worth mapping before you write an offer. More on that in how seller credits lower your payment.
Lever three: the program itself
FHA, VA, conventional, and down payment assistance programs price and structure differently. A VA loan for an eligible veteran carries no monthly mortgage insurance and no required down payment. FHA allows lower credit scores with different mortgage insurance mechanics. Down payment assistance in both California and New Jersey may reduce what you bring to closing for buyers who qualify. The right program is not the one with the lowest advertised rate. It is the one with the lowest total cost for your specific file.
Should I wait for mortgage rates to drop?
I will not tell you rates are going to fall, and I would be skeptical of anyone who does. The Fed's own updated projections point to the possibility of another increase this year. Forecasts have been wrong before, in both directions.
What I can tell you is what waiting has historically cost, and it is not nothing. The Federal Reserve's 2022 Survey of Consumer Finances found that the median net worth of homeowners was about $396,200. For renters and other non-homeowners, it was about $10,400. That gap is not entirely caused by owning a home. Plenty of it reflects income, age, and savings behavior. But monthly principal paydown and long-term appreciation are a meaningful part of the story, and they only start once you own.
The buyers I talked to last summer who said they were waiting for rates to drop have now paid twelve more months of someone else's mortgage, and rates are higher, not lower. That is not a reason to buy a home you cannot comfortably afford. It is a reason to find out what you can actually afford before you decide you cannot. Our buy now vs wait analysis lays out the tradeoff.
What should homebuyers do this week?
Get a real pre-approval, not an online estimate. A verified pre-approval means your income, assets, and credit have been reviewed, and it tells you your actual number in today's market instead of the number from a calculator that has not been updated since March.
Then run three versions of the same purchase: full price with no credits, a slightly higher price with a seller-paid buydown, and a different loan program. In a higher-rate market, those three scenarios can produce meaningfully different monthly payments on the same house. Most buyers never see the comparison, because nobody builds it for them. Our mortgage calculators are a good place to start, and I am happy to build the full comparison with you.
If you are buying at a higher price point in North Jersey, loan structure matters even more right now. My guide on what counts as a jumbo loan in New Jersey explains the 2026 county limits.
Rates going up does not close the door. It just means the door opens differently than it did two years ago, and the buyers who understand the mechanics are the ones walking through it.
If you are wondering whether buying, refinancing, or using down payment assistance makes sense for your situation, connect with Ken Clark Jr. and the #ChampionsofLoans team at PRMG Mortgage. The right strategy starts with a conversation, not a guess.