Updated

Updated · CBS New York · Sep 23

30-Year Mortgage Rate Tops 7.12% for First Time in 2 Years as Treasury Yields Spike

Updated

Updated · CBS New York · Sep 23

30-Year Mortgage Rate Tops 7.12% for First Time in 2 Years as Treasury Yields Spike

Q: Why are mortgage rates climbing higher even after a highly anticipated Federal Reserve rate cut?

Mortgage rates are climbing because they are driven more by long-term bond markets than by the Federal Reserve’s short-term rate cut, and that cut had already been widely priced in. The key benchmark for 30-year fixed mortgages is the 10-year Treasury yield, not the fed funds rate. In recent weeks, that yield has risen sharply as investors demanded higher returns amid worries about sticky inflation, elevated oil prices, heavy government borrowing and broader borrowing-cost pressures. When Treasury yields rise, mortgage rates usually rise with them. Economists also note that the Fed’s quarter-point cut was highly anticipated, so lenders had already incorporated much of it into mortgage pricing before the announcement. That meant the cut itself did little to push mortgage rates lower. Markets are also focused less on one Fed move and more on the expected path of inflation and rates over time. Another factor is the spread between mortgage rates and Treasury yields. Mortgage lenders package loans into mortgage-backed securities, which compete with Treasuries for investor demand. If investors want extra compensation for risk or volatility, that spread can stay wide or widen, keeping mortgage rates elevated even if the Fed eases. The result is that mortgage costs can rise despite a Fed cut. That is why the average 30-year fixed rate moved above 7%, while more borrowers shifted to adjustable-rate mortgages, which currently offer lower initial rates but carry future reset risk.

3 articles · Updated · CBS New York · Sep 23

The average 30-year fixed mortgage rate climbed to 7.12% in the week ended Sept. 18, the highest level since May 2024 and the first move above 7% in more than two years, Mortgage Bankers Association data showed.
The jump tracks a surge in the 10-year Treasury yield, which was hovering near 5% on Wednesday after rising more than 1 percentage point since late February on inflation, government-debt and borrowing-cost worries.
Higher fixed rates are pushing some borrowers toward adjustable-rate loans; MBA economist Mike Fratantoni said 5/1 ARMs were more than 1 percentage point cheaper than fixed mortgages.
The increase lands as home prices remain near record highs and the market heads into its usual seasonal slowdown, adding to affordability pressure that could further stall homebuying and mortgage origination growth if rates stay elevated.