The 30-year mortgage rate has increased by seven basis points and finally surpassed 7% for the first time since January 2025, according to Freddie Mac data. As of Thursday, Sept. 24, the average 30-year rate was 7.03%.
The 10-year Treasury bond yield has also hit a significant point. It surpassed 5% on Tuesday, Sept. 22, and was 5.19% as of Sept. 24, per CNBC. The yield is at its highest point in about 19 years.
While shorter-term loans are directly impacted by the federal funds rate, mortgage loans tend to follow the 10-year Treasury yield more closely. Mortgages are longer-term loans, so they follow longer-term indices.
“Turmoil in the U.S. Treasury bond market is disrupting plans for shoppers hoping to buy a home at the tail end of the 2026 season,” senior economist Kara Ng wrote for Zillow.
Why are mortgage rates going up?
You may be wondering why the 10-year Treasury yield — and, consequently, mortgage rates — are spiking recently.
“The primary reason is the conflict with Iran and the pressure being put on the economy with higher oil prices,” Corey Burr, senior vice president at TTR Sotheby’s International Realty, told TheStreet. “As long as oil trades above $90/barrel, the chances of meaningful progress being made on lower CPI and PPI numbers will remain elusive.”
High oil prices hurt inflation in several ways. For example, energy costs rise, shipping becomes more expensive, and higher transportation costs can lead to higher retail prices.
Inflation impacts the Federal Reserve’s monetary policies. To lower inflation, the Fed might raise the federal funds rate. That’s exactly what it did at its Sept. 15-16 meeting — the central bank hiked its rate by 0.25%, bringing it to 3.75%-4%.
The Fed doesn’t directly set mortgage rates. However, its decisions and signals can influence Treasury yields, which in turn can affect mortgage rates.
The next Fed meeting is Oct. 27-28, and there’s plenty of speculation that the Fed will raise rates again. As of Sept. 24, the CME FedWatch tool showed a 70.9% chance that the FOMC will hike the rate by another 0.25% at the October meeting.
The anticipation of another federal funds rate hike so soon also plays a part in driving up the 10-year Treasury bond yield. If this expectation continues, bond yields and mortgage rates could both keep rising.
Are mortgage rates expected to drop soon?
Mortgage rates are unlikely to fall in the near future. At least not consistently or significantly.
“In order to get lower rates, an end to the conflict with Iran and an opening of oil trade routes must take place,” Burr told TheStreet. “This will help loosen up the inflationary pressures that have built through 2026.”
“Second, there can’t be any surprises on the upside in the upcoming monthly reports on the CPI, PPI, and employment,” Burr continued.
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The 10-year Treasury bond yield — and mortgage rates — typically increase when inflation is high and the job market is strong.
If the upcoming Consumer Price Index (CPI) or Producer Price Index (PPI) shows aggressive inflation growth, the 10-year Treasury yield could increase. It may also rise if job reports show strong employment numbers.
As long as the conflict in Iran continues, oil prices remain high, and investors anticipate another Fed rate hike in response to the economy, mortgage rates will probably stay elevated or even keep rising.
These high rates could keep more would-be homebuyers on the sidelines and slow down an already-struggling housing market.
Related: Zillow finds a bigger problem than high mortgage rates
