Mortgage rates drop despite bond market turmoil: Why rates may rise again in coming weeks
Mortgage rates fell slightly despite bond market volatility. Here’s why Treasury yields, inflation, the US deficit and oil prices could push rates higher.
Mortgage rates fell slightly last week despite a big jump in bond market volatility. The average 30-year fixed mortgage rate was 6.65% this week through Wednesday, down from 6.67% a week earlier, according to Freddie Mac. The small drop came during a very unstable week for the bond market. Long-term US government bond yields moved sharply as investors worried about inflation and the country’s growing budget deficit.
The 30-year Treasury yield reached its highest level since 2007. Long-term government bond yields briefly moved above 5.3% on Tuesday, their highest level in 19 years, as investors became more concerned about inflation and the US fiscal deficit, according to Yahoo Finance. The Treasury then stepped in to support the bond market.
On Wednesday, the US Treasury said it would double the size of its long-term bond buyback program. The move was aimed at supporting bond prices and bringing interest rates lower. Bond yields fell sharply after the Treasury announcement. However, the calm did not last for long. Yields moved higher again on Thursday, showing how nervous investors remained about the bond market.
Why did mortgage rates fall?
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Deep Dive
How does the 10-year Treasury yield affect mortgage rates?
The 10-year Treasury yield closely tracks mortgage rates because most homeowners refinance or sell before the loan matures, making it a better indicator than the 30-year yield.
Why might mortgage rates rise again despite a recent drop?
Mortgage rates may rise again due to persistent inflation concerns, the US fiscal deficit, and external pressures like oil prices, despite recent government interventions to lower yields.
What factors contributed to the recent instability in the bond market?
The bond market's instability stemmed from rising concerns over inflation, the US budget deficit, and heavy borrowing by technology companies, which increased competition for investor funds.
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Mortgage rates don’t move in lockstep with the 30-year Treasury yield. Instead, they tend to track the 10-year Treasury yield more closely because most homeowners don’t hold onto the same mortgage for the entire 30-year term. Many sell their homes or refinance well before the loan matures, making the 10-year yield a more useful indicator for where mortgage rates are headed.
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Mortgage rates don’t move in lockstep with the 30-year Treasury yield. Instead, they tend to track the 10-year Treasury yield more closely because most homeowners don’t hold onto the same mortgage for the entire 30-year term. Many sell their homes or refinance well before the loan matures, making the 10-year yield a more useful indicator for where mortgage rates are headed.
Durva More is a Senior Content Producer at Hindustan Times, where she covers finance, and global news. She brings experience across digital and television journalism, with a strong focus on breaking news, business reporting, and international affairs. Before joining Hindustan Times, Durva worked as an International News Writer at The Economic Times, covering a diverse range of subjects including global politics, business, sports, entertainment, and major world events. She also worked as a Business Reporter with NDTV Profit. A postgraduate diploma holder in Journalism from the Asian College of Journalism, Durva is passionate about field reporting and storytelling. She thrives on the adrenaline of chasing stories, speaking with people from different walks of life, and amplifying voices that deserve to be heard. Her reporting is driven by curiosity, accuracy, and a commitment to making complex subjects accessible to readers. When she is not chasing stories or covering breaking news, Durva enjoys reading books and painting. She loves exploring new ideas, meeting people, and learning about different perspectives. For her, both journalism and art are ways to understand the world and tell stories that matter.
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