Rates rose, refinance applications fell, and the Fed decides Wednesday

The week in rates

The 30 and 15 year numbers come from Freddie Mac's weekly survey, which averages the rates on home purchase applications that lenders across the country submit to Freddie Mac. The survey looks at one kind of borrower. That borrower is buying a home with 20 percent down and excellent credit. The loan is not backed by a government program such as FHA or VA, and it is within the standard loan size limit. Your own rate depends on your credit, your down payment, the size of your loan and more. Use these as a read on the market, not as the rate you should expect.

The 10 year Treasury yield is the return investors get on 10 year US government bonds. Mortgage rates tend to rise and fall with it, which is why it is worth watching.

The 10 year Treasury was at 4.83 percent on September 9, up from 4.79 a week earlier. That is a small move, but it is the highest since October 31 2023. It did not climb in a straight line. It dipped to 4.77 on September 3, then rose on every day the bond market was open after that: 4.78 on September 4, 4.80 on September 8 and 4.83 on September 9. The market was closed for Labor Day in between.

The prime rate, which home equity lines follow

I do not publish an average rate for home equity loans or home equity lines of credit. Each lender prices them differently, and published averages disagree by close to a full percentage point depending on the borrower they assume. The prime rate is different. It is one published benchmark, the rate posted by most of the largest US banks, and most home equity lines are priced from it.

Home equity lines of credit are usually priced at prime plus an amount the lender adds, so when prime moves, most line of credit rates move with it. The rate on a fixed rate home equity loan you already have does not change at all. That matters this week because the Federal Reserve announces its decision on Wednesday, and prime usually follows a Fed change within a day or two. If the Fed raises rates, most variable rate lines of credit would adjust at their next billing cycle. A line with a minimum rate, a limit on how far its rate can rise, or an option to switch to a fixed rate may not move the same way. The amount a lender adds on top of prime still varies, and the only honest way to know yours is to have a lender work up the numbers on your own loan.

Who applied for mortgages

The Mortgage Bankers Association tracks mortgage applications every week through a survey of lenders. Most of these numbers are shown after adjusting for normal seasonal swings, like slower holiday weeks. That makes one week fairer to compare with the next.

How households are doing

These numbers change slowly. They show how much equity, debt and savings American households have, which shapes what options make sense for a homeowner. Each one shows its own date because they are updated on different schedules.

For loan officers

This part is written for loan officers. If you own a home or are buying one, it is still worth reading, because it shows the kind of conversation a good loan officer should be having with you.

• Call every client with a loan in process who has not locked, before Friday's inflation report and Wednesday's Fed decision

  That is the whole message, and here is why. The 10 year Treasury just reached its highest level since October 31 2023. That does not predict where rates go next, and you should not present it that way. It does mean the 10 year is at the top of its recent range, which is a bad time to leave a borrower undecided.

  Where things stand. The Fed's target range for short term interest rates is 3.50 to 3.75 percent. The Fed held it there in July on a nine to three vote, so its members genuinely disagree. The August jobs report showed 162,000 jobs added against a forecast near 53,000, unemployment held at 4.1 percent, and average hourly pay was up 3.1 percent over the year. Futures and prediction markets have put the chance of a Fed increase anywhere from about 48 to 66 percent since August 28, which means nobody knows. Do not quote those odds to a client, because they change every day.

  So on Thursday September 10, before Friday's 8:30 Eastern inflation report, call every client with a loan in process who has not locked, following your compliance team's rules for contacting applicants. Call anyone still unlocked again on Monday September 14, before the Fed announces Wednesday afternoon. Locking protects today's price for a set number of days. Before you dial, know what your company charges to extend a lock and whether it offers a float down, which can let a locked loan get a lower rate if pricing improves, under conditions your company sets, because the homeowner section of this page tells clients to ask what an extension costs in dollars. Waiting is a bet on news nobody has seen yet. Some clients will choose to wait, and that is fine as long as it is a real choice. What you want to avoid is a client finding out on Friday that nobody called them on Thursday.

  Every rate and range named here is a published national figure from the dated sources on this page. None of them is an offer, a quote, or a rate anyone is being offered.

• Next week's unadjusted application numbers will likely show a big drop, and much of it is likely to be the holiday

  Labor Day throws off the unadjusted application numbers two weeks in a row, in opposite directions.

  This week, applications to buy a home came in 4 percent higher than the same week last year, before seasonal adjustment. That sounds like buyers coming back even as rates rose. Check the calendar first. Last year's comparison week included Labor Day, so it had four business days, and this year's week had five. A week with 25 percent more business days beat last year by only 4 percent. Applications do not rise in step with business days, so you cannot turn that into a number, but buyer demand is more likely running a little below last year than above it. The survey does not publish a figure that corrects for this, so do not put one in writing.

  Be consistent about it. The same shorter comparison week means the 25 percent drop in refinance applications may understate the real decline. Do not use the calendar to explain away only the number you do not like.

  Next week is the reverse. The survey released Wednesday September 16 covers the week that includes this year's Labor Day, so it has four business days against last year's five. The numbers before seasonal adjustment will likely look bad for that reason alone.

  So send a short note to your real estate agents and builder contacts now: next week's mortgage application headlines will likely show a sharp drop before seasonal adjustment, a big part of it is the holiday, and the seasonally adjusted purchase number is the one to watch. The Mortgage Bankers Association's seasonal adjustment is designed to account for holidays, so say clearly that your caution is about the unadjusted numbers and the comparison with last year.

• Homeowners insurance is still rising, but more slowly, and shopping it can help a borrower who is close to qualifying

  ICE published its September Mortgage Monitor on September 10, and it focuses on homeowners insurance. Nothing got cheaper, so do not tell anyone it did. What changed is the pace. Insurance costs rose 8.7 percent over the past year, down from 11.4 percent at the start of this year and a peak of 15.1 percent at the end of 2024. The second quarter increase of 1.8 percent was the smallest since ICE started tracking it. Insurance is now 9.6 percent of the average monthly mortgage payment, ranging from 24.3 percent in New Orleans to 4.3 percent in San Jose.

  The useful part is this. Homeowners who shopped and switched insurers cut their premiums 6.6 percent, a record, while raising their coverage limits 7.3 percent and lowering their deductibles 1.4 percent. Homeowners who stayed paid 10.4 percent more. Treat that as the gap between two groups, not what any one client will get. The people who shop are more likely than most to have just gotten a big increase, to live where insurers compete for business, and to have homes a new insurer is willing to cover.

  Keep the size in perspective. The gap between the two groups is about 15 percent of what a homeowner who stays would pay for insurance, not of the whole payment. Where insurance is 9.6 percent of the payment, that works out to roughly one and a half percent of the payment. In New Orleans it is about 3.7 percent of the payment, and in San Jose about 0.7 percent. It can help a borrower who is just over the qualifying limit. It will not rescue a file that is far off.

  On active loans, run the new premium through the affordability calculator with the client on the phone, so they can watch their numbers change for themselves. For past clients, send an email rather than calling, and write it so it is useful whenever they open it, because insurance is easiest to shop in roughly the 30 to 60 days before the policy renews, and you will not know each past client's renewal date. Sort that list by the insurance amount in each closing file rather than by state, since the 24.3 percent figure is New Orleans specifically and not all of Louisiana.

  Before you contact past clients, get the list and the wording approved by your compliance team. That client list belongs to your company, and contacting past clients can fall under Do Not Call rules, telephone consumer protection rules, and commercial email rules, so your company has to sign off first. Three more limits. A quoted premium is not final until there is a binder, the written confirmation that coverage is in force, so do not put a quoted number in the file. You are not an insurance agent, so send coverage questions to one. And a lower premium that only comes from a higher deductible is not a saving, it just shifts more of the risk onto the client.

• Refinance applications are down 25 percent from a year ago, and much of the business that is left is likely not about lowering a rate

  Refinance applications are 25 percent below a year ago, and refinances fell to 40.9 percent of all applications. That is still four in every ten applications, at a time when the Mortgage Bankers Association put the average rate on a 30 year fixed loan within the standard size limit at 6.85 percent. The survey does not say why people apply, so do not claim to know. Two thirds of the main mortgages people already have are under 5 percent, and for those borrowers a refinance done only to lower the rate or shorten the term is hard to justify. A little more than 1 in 5 are at 6 percent or higher, though, and for borrowers in that group whose rate sits above today's averages, a refinance to lower the rate may be worth running the numbers on.

  What is left is likely to be mostly people who need money. Second loans made up 54 percent of the equity homeowners took out. Balances on home equity lines of credit stand at 459 billion dollars. Americans carry 1.26 trillion dollars in credit card balances, though not all of it is charged interest, and the average card rate was 20.94 percent in the Federal Reserve's May reading. So the client to call is often not the one with a high mortgage rate. It is the one with a low mortgage rate and expensive debt everywhere else, and the skill is helping them without giving up that low mortgage rate.

  Do it in this order. First, run the blended rate calculator with their real balances, so you both see what all of their borrowing costs together. It usually shows the mortgage is the cheap money and the cards are the problem, which tells you that replacing the mortgage is the wrong move. Then run the second loan option through the home equity loan comparison, so they see both sides: what is usually a lower monthly cost, against debt that may now take much longer to pay off and is now tied to the house. Say the house part clearly. A credit card is not secured by the home. A second mortgage is, and if the payments stop, the lender can foreclose.

  Plan for both outcomes before Wednesday. If the Fed holds, prime stays put, though mortgage pricing can still move on the Fed's forecasts. Clients who did not lock and came through without a price change got a break rather than being proven right. Tell them which it was, because that conversation is what gets them to lock next time. If the Fed raises rates, prime usually follows within a day or two, and most variable rate home equity lines of credit adjust at their next billing cycle, with the exceptions noted higher up this page. That makes a fixed rate second loan worth discussing now with these clients, and the note is one sentence: your line of credit is likely to cost more after your next statement, here is what a fixed option would involve, and let us price your actual loan instead of guessing.

  Most of these conversations should end in a second loan rather than a refinance, and a fair number should end in neither. Say so, even when the bigger loan would pay you more.

  Every rate named here is a published national benchmark or average from the dated sources on this page. None of them is an offer, a quote, or a rate anyone is being offered.

What to watch next

Two events in the next week could move mortgage rates for the rest of the month. The August consumer price index, the most watched inflation report, comes out Friday September 11 at 8:30 Eastern from the Bureau of Labor Statistics. It is the last big inflation number the Fed sees before it votes. The Fed's rate committee then meets Tuesday and Wednesday, September 15 and 16, and announces its decision at 2 o'clock Eastern on Wednesday. It also releases its members' own forecasts for the economy and for interest rates, which are likely to say more about what the Fed may do at its October and December meetings than Wednesday's decision does.

The same Wednesday, the Mortgage Bankers Association releases application numbers for the week that includes this year's Labor Day, so the unadjusted numbers will likely fall because of the holiday, even if nothing else changed. Loan officers, check current pricing before your calls on both mornings.