ECONOMY STUDIOIn five weeks, the average rate on a 30-year mortgage jumped from 6.71% to 7.40%1. Credit cards, car loans and the government’s own borrowing got more expensive too. Here is what happened, and why it happened at the same moment the job market almost stopped growing.
The Fed raised rates, and hiring nearly stopped
On September 16, 2026, the Federal Reserve’s rate-setting committee voted 12-0 to raise its target for short-term interest rates by a quarter point, to 3.75–4%2. It was the Fed’s first increase since July 20233. Its statement was blunt: “Inflation remains elevated.”2
The timing looks odd. Employers added just 29,000 jobs in September, and the unemployment rate was 4.2%, with 7.1 million people out of work4. A weak job market usually argues for cheaper money, not dearer.
The Fed’s reason is prices. Consumer prices rose about 3.4% in the year to August5, well above the Fed’s 2% goal2. The minutes of the meeting show several officials saw further tariff increases as a risk to inflation, and warned that the longer energy prices stay high, the greater that risk6. Brent crude, the global oil benchmark, was $125.44 a barrel on October 67. The same minutes say another increase “would likely be appropriate by year end”6.
It was also an early test for the Fed’s new chair, Kevin Warsh, who succeeded Jerome Powell in May 20268.
Mortgages: 0.69 points in five weeks
The average 30-year fixed mortgage rate was 7.40% on October 8, up from 6.71% on September 31. That is a jump of 0.69 points in five weeks1.
Follow $100,000 of borrowed money
At the record low of 2.65% in January 2021, borrowing $100,000 for 30 years cost about $403 a month in principal and interest1,9. At 7.40%, the same $100,000 costs about $692 a month9. That is about $289 more every month, or $3,468 a year9.
On a $400,000 home loan, the monthly payment goes from $1,612 to $2,770, about $1,158 more9. Over the full 30 years, total interest rises from about $180,000 to about $597,0009.
Why long-term rates are doing the damage
The Fed sets short-term rates. Mortgages follow long-term borrowing costs, and those were rising before the Fed acted. Between the Fed’s July and September meetings, Treasury yields from 2 to 10 years rose about 0.35 percentage points6.
The 10-year Treasury yield, the benchmark that mortgage rates follow, closed at 5.31% on October 5, its highest since 200210. The 30-year yield reached 5.67% on October 7, its highest since July 200211.
When the US government has to pay more to borrow for ten years, lenders charge homebuyers more to borrow for thirty.
It isn’t only mortgages
The average interest rate on credit card accounts that pay interest was 22.36% in August 2026, and 60-month new car loans at commercial banks averaged 7.54%12.
Borrowing is expensive across the board: for families, for businesses and for the government itself. Our mortgage rates, Fed rate and 10-year Treasury yield pages follow each of these numbers as new data comes out.
