As government bond yields climb, mortgage rates in the United States have surged to their highest level in over a year, delivering another blow to the domestic housing market.
Freddie Mac said Thursday that the average rate for 30-year fixed-rate mortgages rose from 6.66% the previous week to 6.71%. A year ago, the rate stood at 6.5%, and borrowing costs haven’t been this high since July 2025.
The rate has lingered around 6.5% but is now moving toward 7%, which could further erode housing affordability—a key issue ahead of the November midterm elections.
Mortgage rates are closely tied to movements in U.S. Treasury yields. On Wednesday, the 10-year Treasury yield hit a peak of 4.82%, its highest level since October 2023. Long-term Treasury yields are experiencing their longest sustained period of elevated levels since 2006, as investors remain cautious about U.S. debt due to large budget deficits, a new wave of corporate bond issuance, and a potentially decisive Federal Reserve meeting.
John Briggs, head of U.S. interest rate strategy for North America at Natixis, said long-term bond yields are expected to stay high “until welfare reforms change the deficit outlook. Repurchases are merely a drop in the bucket.”
In a report released Monday, Bank of America interest rate strategists Megan Swiber and Eleanor Shaw wrote: “Despite Treasury’s repo operations and other recent policy measures, investors remain reluctant to increase duration in Treasuries. The shrinking official sector demand has made the market increasingly reliant on price-sensitive private demand to absorb ongoing Treasury supply.”
Priya Misra, portfolio manager at J.P. Morgan Asset Management, said the Treasury’s repo program might help boost demand for long-term bonds, but “it may pale in comparison to the supply shock caused by artificial intelligence development.”
Soaring financing costs are dampening homebuying demand. According to Realtor.com’s latest monthly housing market trends report, the share of homes for sale in August declined by 0.2% year-on-year—the first negative growth since November 2025.