US mortgage rates climb to 7.40%. How long before paying points pays off?

The average US 30-year fixed mortgage rate rose to 7.40% in the week to 8 October 2026, up from 7.28% a week earlier and 6.30% a year ago, according to Freddie Mac's Primary Mortgage Market Survey.

Where rates are

The 15-year fixed average rose to 6.73%, from 6.60% a week earlier and 5.53% a year ago (Freddie Mac, 8 October 2026).

It is another weekly rise. The 30-year average was 7.03% on 24 September and 7.28% on 1 October.

The Federal Reserve raised its target range by a quarter point to 3.75% to 4% on 16 September. Its next decision is due on 28 October.

Sellers are paying to close deals

Higher rates have swung the market towards buyers. Redfin's analysis, published on 18 September, found that 44.7% of US home sales in the three months to 31 August came with a seller concession, up from 42.6% a year earlier and the highest August share in its records. Redfin called August the strongest buyer's market since its records began in 2013.

Realtor.com's September report, covered by RISMedia on 7 October, points the same way. 20.8% of active listings had a price cut, the highest September reading on record. Active inventory was up 5.4% on the year to more than 1,161,000 homes, and the median home spent 61 days on the market.

Redfin counts a concession when the seller pays for something that lowers the buyer's total cost, such as repairs, closing costs or a mortgage rate buydown. Price cuts are counted separately. For a buyer, a concession is money the seller will put towards the deal, and a lower rate is one of the things it can buy.

Using a concession to buy down the rate

That is where discount points come in. A point is a fee of 1% of the loan, paid at closing, in exchange for a lower rate. At a rate near 7.40%, many loan quotes come with them. Freddie Mac says it can't report average fees and points because lenders don't always supply them, so the trade-off sits on each borrower's Loan Estimate.

A seller credit changes who pays. On a USD 400,000 loan one point costs USD 4,000, so a credit of that size covers it in full. A buyer who pays for the point has to keep the loan long enough to earn it back. A buyer whose seller pays has nothing to earn back, and only the part of the cost left over after the credit has to be recovered.

Not every buydown works like a point. Some are temporary and lower the rate for only the first year or two, while points lower it for the life of the loan. Ask what happens to the payment after the first year.

The question a point raises is simple. How long do you need to keep the loan before it has paid for itself?

When do points pay for themselves?

The Mortgage Points Calculator in Stresst answers that. You enter the loan amount and term, whether it is principal and interest or interest only, whether the points are paid in cash or added to the loan, how many years you expect to keep it, and up to three lender quotes, each with its own rate and points. It shows the month from which each set of points works in your favour, a year by year position, and each quote's payment.

Take an illustrative USD 400,000, 30-year loan, points paid in cash, with three quotes:

• Quote A: 7.50%, no points. Monthly payment USD 2,796.86
• Quote B: 7.125%, 1 point (USD 4,000). Monthly payment USD 2,694.87
• Quote C: 6.875%, 2 points (USD 8,000). Monthly payment USD 2,627.72

Quote B's payment is USD 101.99 a month lower than Quote A's, and Quote C's is USD 169.14 lower. If a seller credit of USD 4,000 or USD 8,000 pays for the points, that saving starts in month one.

If you pay for the points yourself, the calculator shows the single point working in your favour from month 32 (2 years 8 months). The two points take until month 39 (3 years 3 months).

The common shortcut divides the cost by the monthly saving: month 40 for Quote B, month 48 for Quote C. The calculator gets an earlier answer because it also counts the loan balance. A lower rate puts more of every payment towards the principal, so you owe less.

Over a seven-year hold, Quote B comes out USD 6,610 ahead of Quote A (USD 4,567 in lower payments after the cost of the point, plus USD 2,043 less owed). Quote C comes out USD 9,669 ahead.

What if rates fall and you refinance early?

That's the other side of a point. The year by year table shows what happens if the loan doesn't last:

• After 1 year: Quote B is USD 2,497 behind, Quote C USD 5,496 behind
• After 2 years: B is USD 989 behind, C USD 2,982 behind
• After 3 years: B is USD 525 ahead, C still USD 461 behind

So a refinance within two years, if rates came down, would leave both sets of points short of paying for themselves. The rates, points and loan here are illustrative, not offers.

Points are only part of the cash due at closing. Closing Costs & Transfer Tax estimates the rest for any state: transfer tax, title insurance, origination and lender fees, appraisal and inspection. Discount points aren't one of its lines, so they sit on top of its total.

Run your own numbers in Stresst

The figures in this article came straight out of the Stresst app. Put in the quotes on your own Loan Estimate and you'll have your break-even month in a couple of minutes.

The Mortgage Points Calculator and Closing Costs & Transfer Tax are Premium tools. Mortgage Payment, Total Purchase Costs and the Property Tax Estimator are free. Premium also adds the ARM Stress Test, ARM vs Fixed Rate, PMI Estimator and Debt-to-Income Ratio, plus PDF export on every calculator, with a 7-day free trial.

Freddie Mac publishes its next weekly rate on Thursday 15 October and the Fed decides again on 28 October, so download it now and test any quote with points before you lock.

Download Stresst free on Google Play

Know your numbers before you commit.

Sources

• Freddie Mac, Primary Mortgage Market Survey, 8 October 2026. https://www.freddiemac.com/pmms
• Freddie Mac, Primary Mortgage Market Survey, 1 October 2026. https://www.freddiemac.com/pmms
• Redfin, "Nearly Half of Homebuyers Get Concessions From Sellers as Most Markets Tip in Buyers' Favor", 18 September 2026. https://www.redfin.com/news/home-seller-concessions-august-2026/
• RISMedia, "Price Cuts Reach September Record as Inventory Nears Pre-Pandemic Levels", 7 October 2026. https://www.rismedia.com/2026/10/07/price-cuts-reach-september-record-inventory-nears-pre-pandemic-levels/
• Federal Reserve, FOMC statement, 16 September 2026. https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm
• Federal Reserve, FOMC meeting calendar 2026, checked 7 October 2026. https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm