Mortgage Rates Update: September 18th, 2025

Mortgage markets saw modest relief this week, with rates easing even as Treasury yields moved higher. Economist Bill Knudson emphasizes how spreads narrowed but still remain above historical norms, reflecting lender caution despite signs of inflation stability.

---

For a $100,000 loan at 6.26%, the monthly payment decreased $6 to $616.

Upcoming releases:

• Next new jobs Oct 3    (9.5.25 New jobs 22k, unemployment rose to 4.3%)

• Next CPI release is Oct 15   (CPI increased from 2.7% to 2.9%)

• Next Fed meeting is Oct 29   (The Fed decreased rates 25bp on Sept 17)

Mortgage Rates Update: September 18th, 2025

---

Key Developments

• Mortgage Rates Declined:

  • The 30-year fixed mortgage rate fell 9 basis points (bp) to 6.26%.

  • A $100,000 loan now carries a monthly payment of $616, down $6 from last week.

• Borrower Affordability:

  • Net monthly interest expense: $365.

  • About 59% of the payment goes toward interest.

  • Income needed to qualify: $26,416, based on a 3.8x multiplier.

• Spread Analysis:

  • The spread between the 30-year mortgage and the 10-year Treasury narrowed 19bp to 215bp.

  • Still, this is 47bp above the long-term average (168bp), leaving a sizable “safety cushion” for lenders.

• Market Context:

  • CPI for August registered 2.9%, reflecting ongoing shelter and service cost pressures.

  • The 10-year Treasury yield rose 10bp, underscoring diverging moves between Treasuries and mortgages.

Knudson’s Perspective

Knudson interprets the decline in mortgage rates against rising Treasury yields as a constructive sign for borrowers. Still, elevated spreads highlight the persistence of lender risk aversion. Looking ahead, he expects inflation moderation into the 2.5%–3% range will gradually align spreads closer to historical norms, supporting affordability gains.