Why Are Mortgage Rates Rising Again — and What Does That Mean for Western Colorado Homebuyers?

About

the Author

Scott Wagner is a mortgage loan officer with nearly 20 years of experience in the mortgage industry, including experience as a senior mortgage underwriter. Based in Glenwood Springs, Colorado, Scott works with homebuyers and homeowners throughout the Roaring Fork Valley, Western Colorado and beyond. His approach is simple: help people understand their options, the numbers behind them and the bigger financial picture so they can make smarter mortgage decisions.

Scott Wagner | NMLS #612287

If you've been watching mortgage rates lately, you may be wondering:

What happened?

Mortgage rates have moved sharply higher, and on September 16 the Federal Reserve added another headline by raising its benchmark interest rate by 0.25%.

So it would be easy to assume:

“The Fed raised rates. That's why mortgage rates went up.”

Except that's not really what happened.

And if you're thinking about buying a home in Western Colorado, understanding the difference matters.

The Fed doesn't set mortgage rates

This is probably one of the biggest misconceptions about mortgage rates.

The Federal Reserve controls a short-term benchmark called the federal funds rate.

It does not set the rate on a 30-year mortgage.

Mortgage rates are driven much more directly by the bond market. Inflation expectations, economic growth, geopolitical risk and expectations about future Fed policy all influence what investors demand to own longer-term bonds and mortgage-backed securities.

And the bond market had been moving well before this week's Fed meeting.

According to Mortgage News Daily, the average top-tier 30-year fixed mortgage rate reached 7.24% on September 16.

Interestingly, when the Fed actually announced its quarter-point increase, the bond market barely reacted. The move had largely been anticipated.

The bigger reaction came as Fed Chair Kevin Warsh spoke afterward about a strong economy, inflation that hasn't made enough progress and the need to remove some accommodation from the economy.

In other words:

The Fed didn't suddenly make mortgage rates go up yesterday.

The bond market had already been telling us this story.

So why have rates been under so much pressure?

Here's where oil prices, inflation and your mortgage start becoming connected.

Since the Middle East conflict escalated earlier this year, energy prices have become another source of inflation pressure.

And energy doesn't exist in a vacuum.

Think about how many things require energy somewhere along the way.

Food has to be grown and transported.

Building materials have to be manufactured and delivered.

Construction equipment requires fuel.

Manufacturers require energy.

Trucks move products across the country.

When energy becomes substantially more expensive, some of those costs eventually work their way through the economy.

That's why the bond market pays so much attention to oil.

Mortgage News Daily was already documenting the relationship in March, noting that rising oil prices were putting upward pressure on bonds and mortgage rates.

And that leads us to something I think is getting lost in a lot of the discussion about inflation.

The Fed can reduce demand. It can't manufacture supply.

The Federal Reserve has two primary jobs: maintaining stable prices and supporting maximum employment.

Right now, it has a difficult balancing act.

Inflation remains above the Fed's 2% goal, while the economy and labor market have remained relatively resilient.

So the Fed raised its target rate by 0.25% to 3.75%–4.00%.

Here's what higher interest rates can do:

They can make borrowing more expensive.

That can cause consumers to spend less.

Businesses may invest less.

Companies may eventually hire fewer people.

Homebuyers may qualify for less or decide to postpone buying altogether.

In other words, higher interest rates can reduce demand.

But there's another half of the conversation that deserves attention.

Supply.

Higher interest rates can't produce another barrel of oil.

They can't manufacture more building materials.

They can't reopen a disrupted shipping route.

They can't build another factory.

And they can't resolve a geopolitical conflict.

That doesn't mean the Fed should ignore inflation caused by supply problems.

It means the primary tool the Fed has available works mostly by influencing the other side of the equation: demand.

We've seen this problem before

Think back to what happened during and after COVID.

Factories shut down. Supply chains became disrupted. Materials became difficult to obtain. At the same time, consumer demand changed dramatically.

That combination helped produce significant inflation.

And while many of those disruptions eventually improved, something interesting remains.

According to the Bureau of Labor Statistics, U.S. manufacturing output grew at an annualized rate of only 0.2% from the fourth quarter of 2019 through the second quarter of 2026.

Think about that for a moment.

Over more than six years, domestic manufacturing output has barely grown.

That doesn't mean manufacturing is solely responsible for today's inflation. It isn't.

But perhaps it tells us something important:

You can't understand inflation by looking only at demand. Supply matters too.

And that's where this gets tricky for the Fed.

Raise rates too little and inflation could remain persistent.

Raise them too aggressively and you risk slowing consumer spending, business investment, housing and eventually employment—without directly fixing the supply problem that contributed to higher prices in the first place.

What does any of this have to do with buying a home in Western Colorado?

Quite a bit.

I'm not going to pretend this is an easy market in which to buy a home.

It isn't.

We live in an incredibly desirable part of Colorado. Housing supply is limited, and many of the people who make our communities work don't earn incomes that have kept pace with local home prices.

And generally, the farther west you move—from the upper Roaring Fork Valley toward Glenwood Springs, New Castle, Silt and Rifle—the more purchasing power you tend to have for the same housing dollar.

But today's market is also creating something we haven't seen as much of in recent years:

Negotiating leverage.

I'm seeing buyers hesitate because of higher mortgage rates.

And maybe that's worth looking at from the other side.

When fewer buyers are competing for the same property, homes can sit on the market longer.

In Glenwood Springs, homes took an average of 64 days to sell during the three months ending August 2026, compared with 27 days during the same period a year earlier.

That's a meaningful change.

It doesn't mean every seller is desperate to negotiate. A great house that's priced correctly can still attract plenty of attention.

But it can mean buyers have opportunities that weren't available when everybody was fighting over the same homes.

Maybe that's negotiating the purchase price.

Maybe it's asking the seller to contribute toward closing costs.

Maybe it's negotiating funds for an interest-rate buydown.

Or maybe it's simply having enough time to look at a house, think about it and make a rational decision without five other offers arriving before dinner.

That's worth something too.

“Scott, shouldn't I just wait until rates come back down?”

I hear versions of this question all the time.

And my response usually starts with another question:

What exactly are you waiting for?

If you can't comfortably afford the payment today, that's important.

If you aren't financially prepared for homeownership, waiting may absolutely be the right decision.

If you're likely to move again soon, we should talk about whether buying makes sense at all.

But imagine you're financially prepared.

You can comfortably afford the payment.

You want to own a home.

And you're planning to stay there long enough for homeownership to make sense.

Are you really better off trying to predict the perfect mortgage rate?

Maybe.

But consider what could happen if rates fall substantially.

You probably won't be the only person who notices.

Buyers who have been sitting on the sidelines may come back.

Competition could increase.

Seller concessions could disappear.

And home prices could respond to the additional demand.

You might get the lower interest rate you were waiting for while giving up some of the negotiating leverage available today.

Or rates could simply remain elevated longer than expected.

Nobody knows with certainty.

That's why I don't believe in building a homeownership plan around trying to perfectly time the market.

Homeownership is a long-term decision

For people who are financially prepared and stay in their homes long enough, homeownership has historically been a powerful way to build equity and household wealth.

You make a mortgage payment and part of that payment reduces what you owe.

Over time, if the property appreciates, that can add another layer of equity.

Neither appreciation nor a future refinance is guaranteed.

That's important.

I would never recommend buying a home today simply because you assume you'll refinance into a lower rate next year.

But I also wouldn't automatically postpone a sound long-term homeownership decision because today's mortgage rate isn't the rate you wish it were.

If you can afford to buy, you're financially prepared and you're committed to being a homeowner, I wouldn't let today's interest-rate environment make the decision for you.

Let's look at the whole picture.

Maybe the opportunity simply looks different today

A few years ago, the opportunity was incredibly cheap money.

The downside was intense competition, rapidly rising prices and buyers frequently having very little leverage.

Today's opportunity looks different.

Financing is more expensive.

But some buyers have more time.

There may be less competition.

And in the right transaction, there may be significantly more room to negotiate with the seller.

Neither environment is universally better.

They're different.

So perhaps the better question isn't:

“Is this a good time to buy?”

It's:

“Does buying a home make sense for me in this market?”

Those are two very different questions.

And the second one is actually answerable.

What should you watch next?

Watch the Federal Reserve.

But don't watch only the Federal Reserve.

If you want to understand where mortgage rates may be headed, pay attention to:

Inflation. Energy prices. The bond market. Employment. Housing inventory. And the balance between supply and demand.

As of September 16, the 10-year Treasury yield reached approximately 5.00%, another indication of just how much pressure remains in the longer-term bond market.

What happens next will depend on far more than one Fed meeting.

If inflation pressures ease, energy markets stabilize and bond investors become more comfortable with the outlook, mortgage rates could respond favorably.

If inflation remains stubborn, energy pressures continue or longer-term Treasury yields remain elevated, mortgage rates could remain higher.

Nobody can tell you exactly where rates will be six months from now.

So focus on what you can control.

Your income.

Your debts.

Your savings.

Your monthly payment.

The home you're considering.

How long you expect to own it.

And the negotiating opportunity that's actually in front of you today.

Then we can determine whether buying makes sense.

Because sometimes the opportunity isn't when every headline tells you conditions are perfect.

Sometimes it's when other buyers are hesitant—and you're prepared.

Scott WagnerLoan Officer | NMLS #612287Scott's Mountain Home FinancePowered by Edge Home Finance, LLC | NMLS #891464

This information is provided for educational purposes and is not a commitment to lend. Mortgage rates, loan programs, qualification requirements and market conditions are subject to change.