The long-term average rate on a 30-year fixed mortgage jumped up sharply on Friday, increasing 13 basis points to 7.1%. This increase brings us to the most recent peak level since the middle of February. It unabashedly expresses the continuing storm in the financial markets, produced by inflationary expectations and increased tariffs.
Mortgage rates move in constant concert with the yield on the 10-year Treasury, which has experienced significant volatility in recent weeks. This time around, beginning this week, interest rates, particularly the yield on the 10yr Treasury, shot up explosively mid-week. This jump was caused by announcement of new tariffs affecting dozens of countries, which affects mortgage rates. Things changed in a hurry when President Donald Trump drastically reduced the tariff rates in an unexpected move just hours later. This reversal led to a significant decline in yields.
The inflation rate has pumped itself up to the top of the list of worries for consumers and investors between times. In a single month, inflation expectations rose sharply from 5% in March to 6.7% in April. This sudden spike was the most inflation we’ve had since 1981. Like bond yields in general, inflation expectations are moving up. This has led mortgage rates to be a bit on the wild side, tagged as a “rollercoaster ride” in this week’s.
Matthew Graham, chief operating officer at Mortgage News Daily, provided insight on the current market conditions:
“This is either the end of the worst week for 10-year yields since 1981 or the end of a fairly average two weeks that fit right in with the trend of the past 18 months.”
With each increase in mortgage rates, fears for the housing market continue to bubble up. Nancy Lazar, global chief economist at Piper Sandler, expressed her apprehension about the impact on housing:
“Forget about housing in this environment. With mortgage rates back up, consumers certainly concerned about the job market, housing will also be on the weak side.”
Together, increasing mortgage rates and inflationary pressures make for an especially tough time to be a homebuyer. Thousands of people will have to change the way they were planning to buy or improve their home as they face even higher costs to borrow money.