U.S. mortgage rates remained elevated heading into the new week, with 30-year fixed mortgage rates nearing 7%. The primary drivers are rising U.S. Treasury yields and stronger-than-expected August employment data, which have prompted markets to reassess the Fed’s policy trajectory ahead of its September meeting.
30-year mortgage rates continue to rise
The latest daily data shows that the average 30-year fixed mortgage rate for prime borrowers stood at 6.89% on September 4, rising by another basis point from the previous day and nearing the prior high of 6.91%. The 15-year fixed mortgage rate was 6.49%, while jumbo mortgage rates reached 7.06%.
According to the weekly data from the Mortgage Bankers Association of America, the 30-year contract rate stood at 6.79%, also slightly higher than the previous reading. Over the past year, mortgage rates had dipped to around 6% in March before rebounding significantly.
10-year U.S. Treasury yields remain under pressure
The primary pressure on mortgage rates still comes from the bond market. U.S. mortgage pricing is more directly influenced by Treasury yields and the mortgage-backed securities market than by changes in the Federal Reserve’s overnight policy rate.
The benchmark 10-year U.S. Treasury yield closed at approximately 4.79% last Friday, having risen as high as 4.81% during trading. If long-term yields remain anchored around 4.7% to 4.8%, 30-year mortgage rates are unlikely to see a sustained decline in the near term.
Employment and inflation become the next focus
According to data from the U.S. Bureau of Labor Statistics, non-farm payroll employment increased by 162,000 in August, with the unemployment rate remaining at 4.1%. Following the release of the data, U.S. Treasury yields rose, and market expectations for a Fed rate hike at the September meeting intensified.
According to Reuters, citing futures market pricing, the market priced in a 57% probability of an interest rate hike in September after trading ended last Friday. The upcoming August PPI and CPI data will be key indicators for determining the next direction of interest rates. If inflation remains strong, 30-year mortgage rates could more firmly approach or even exceed 7%.
Mortgage applications remain resilient
Despite rising financing costs, demand for borrowing has not disappeared entirely. According to data from the Mortgage Bankers Association, the total volume of mortgage applications increased by 0.8% week-over-week as of the week ending August 28, with purchase applications rising 2% and refinance applications declining 1%, though still 19% lower than the same period last year.