US mortgage rates have increased once again, reflecting the upward trend in Treasury yields. The current average rate for a 30-year fixed purchase mortgage has reached 7.195%, a rise from 7.155% the previous day, as reported by Zillow data.
The average 30-year refinance rate is 7.287%, while the 15-year mortgage rate is 6.349%. The main reason is the rise in the 10-year US Treasury yield. Mortgage rates generally move with the yield on 10-year Treasury notes. The 10-year yield has climbed to its highest level since 2007, putting fresh upward pressure on home loan rates. Instead, they are closely linked to longer-term borrowing costs, especially the 10-year Treasury yield. The August Consumer Price Index showed inflation running at 3.4% annually, with high energy costs helping keep inflation elevated, according to U.S. The Fed’s inflation target is 2%. With inflation at 3.4%, price growth remains well above the central bank’s target. When the August inflation report was released, the probability of a September rate hike rose to 86%, according to the CME Group FedWatch Tool.
Because inflation is still above its target, that is a problem for the Federal Reserve. Other mortgage rates are also elevated. Mortgage rates do not directly follow the Federal Reserve’s policy rate . When Treasury yields rise, mortgage rates usually move higher too. Higher oil prices can mean higher inflation. When energy becomes more expensive, businesses can face higher production and transportation costs. Those costs can eventually show up in prices paid by consumers. News. Markets have sharply increased their expectations for a Fed rate hike.
The odds of a September rate hike are now at 93%. As long as the 10-year Treasury yield remains elevated, mortgage borrowers could continue to feel the pressure. Because markets are worried about inflation and higher interest rates, the bigger picture is that mortgage rates are rising. The key question for homebuyers is therefore not just what the Fed does tomorrow, but also where Treasury yields, oil prices and inflation go next.
That probability has increased even further. Fed officials were already showing concern about inflation. The central bank kept interest rates unchanged at its July meeting, as widely expected. The rise in oil prices linked to the US-Iran conflict is adding to those inflation fears, while expectations of a Fed rate hike are pushing Treasury yields higher.
