--- title: "Mortgage rates could move even higher - dealing a fresh blow to home buyers" type: "News" locale: "en" url: "https://longbridge.com/en/news/296261883.md" description: "Rising U.S. Treasury yields, driven by debt concerns and inflation, are pushing mortgage rates toward 7%, further straining the housing market. Consequently, about 40% of sellers are cutting prices by an average of 5% to attract buyers. High borrowing costs have led to a 2.3% drop in July contract signings, with homebuyers hesitant to commit due to economic uncertainty and slowing hiring." datetime: "2026-08-18T19:17:42.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296261883.md) - [en](https://longbridge.com/en/news/296261883.md) - [zh-HK](https://longbridge.com/zh-HK/news/296261883.md) --- # Mortgage rates could move even higher - dealing a fresh blow to home buyers By Aarthi Swaminathan Elevated mortgage rates are squeezing the life out of the housing market About 4 in 10 home sellers in the U.S. are cutting asking prices to lure buyers, with the median markdown being about 5%, according to Parcl HQ. More bad news for home buyers: Government bond yields have been marching higher for weeks, putting 7% mortgage rates back on the table. Mortgage rates rose slightly on Tuesday due to a deepening late-summer bond selloff. Worried investors are offloading Treasurys as they grow frustrated with the expanding U.S. debt load, the government's borrowing needs and mounting corporate-debt issuance. Meanwhile, persistent inflation has limited the Federal Reserve's ability to lower short-term interest rates, and oil prices (CL00) (BRN00) are also poised to stay elevated due to tensions between the U.S. and Iran. In other words, bond investors are more concerned about the future of the U.S. debt picture and economy, and that's driving yields up. Rising yields, in turn, have pushed mortgage rates up. The 30-year mortgage rate rose 2 basis points from Monday to an average of 6.75%, according to data from Mortgage News Daily. The recent jump in Treasury yields raises the question of whether 7% mortgage rates could be returning. On Tuesday morning, the yield on the 10-year Treasury note BX:TMUBMUSD10Y briefly touched 4.74%, the highest level since January 2025. At that point, the 30-year mortgage rate topped 7%, per data from Freddie Mac. Per Mortgage News Daily data, the 30-year mortgage rate has yet to react so strongly. But such a move higher may soon be unequivocal. "7% \[mortgage\] rates coming soon is not my base case, but it would not completely shock me, given how much rates have moved in the past six months," Jake Krimmel, a senior economist at Realtor.com, told MarketWatch. (Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.) Mortgage rates don't directly follow the direction of the Fed's benchmark short-term interest rate; instead, they tend to move in tandem with the yield on the 10-year Treasury note, which rises when investors shun this type of government debt. To be sure, the jump in the yield on the 10-year Treasury note was not as large as that on the 30-year Treasury bond BX:TMUBMUSD30Y. Even as 30-year yields jumped to the highest level since 2007, Krimmel noted that the 30-year mortgage rate does not track with the 30-year Treasury as strongly, so the jump in mortgage rates was not that large. The reason for that is because most people only hold on to a mortgage for seven to 10 years, he explained, before they refinance or move. And even though the 10-year yield is also up, 7% mortgage rates are not a guarantee. "One saving grace is that the spread between the 10-year \[Treasury yield\] and the 30-year fixed-rate mortgage has been really stable this year, right around 200 basis points," Krimmel said, "whereas that spread this time last year was 230 to 240 basis points. "It's not likely to get much more narrow than what it is now," he added - but "if it were to widen out, then I would be less likely to take 7% off the table." Home sellers cut prices to bring buyers off the sidelines Nevertheless, persistently high mortgage rates will likely hurt the U.S. housing market further. The sector is already in a deep downturn, and buyers and sellers are frustrated with the current environment. Buyers remain on the sidelines due to high borrowing costs; home sellers in many parts of the U.S. are consequently struggling to sell homes. Existing-home sales could take a hit in the months to come. Contract signings to purchase existing homes fell 2.3% in July from the previous month, as high mortgage rates hindered transactions. Contract signings, or pending-home sales, are a leading indicator of future existing-home sales. "When I talk to agents across the Century 21 network, they tell me the buyers are still out there, but because hiring has slowed and people are watching their own job security more closely, nobody wants to sign a 30-year commitment when they're worried about next quarter," said Mike Miedler, president and CEO of Century 21 Real Estate. 'Nobody wants to sign a 30-year commitment when they're worried about the next quarter.'Mike Miedler, president and CEO of Century 21 Real Estate As buyers pull back, more sellers are cutting prices to boost home sales. About 41% of sellers were lowering asking prices as of Aug. 18, according to data from Parcl HQ. The median markdown on those listings was about 5%. "Sellers are finally realizing that if demand is not there, you have to list for less than sellers have in the past," Realtor.com's Krimmel said. Home builders are also slowing down construction. Builders pulled back on constructing new homes in July, dropping the pace of newly built single-family homes to the slowest level in nearly four years. The last time single-family construction was at this low a level was in November 2022. Economists don't expect a turnaround in the real-estate sector anytime soon. "Affordability has worsened this year, as mortgage rates have climbed and wages have risen only slightly more quickly than home prices," Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote in a note. "The slowdown in population growth, brought on by tougher immigration curbs, also will increasingly weigh on demand," he added. \-Aarthi Swaminathan This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. 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