The 30-year fixed mortgage rate rose last week to its highest level in nearly two years, but the Fed does not set it directly: it tends to follow 10-year Treasury yields, which are influenced by inflation expectations, oil prices and other forces.
Before the Fed’s Sept. 16 decision, the 10-year Treasury yield reached 5%, its highest since 2023, while Bankrate data put the average 30-year mortgage rate at 7%. Yields initially dipped after the Fed raised its benchmark by a quarter point to a range of 3.75%-4%, then rose again. loanDepot’s Jeff DerGurahian said a Japanese central bank rate increase, which was less forceful on inflation than markets expected, renewed pressure on U.S. Treasuries and mortgage rates.
Oil prices and inflation are now the market’s primary focus, DerGurahian said; wars in the Middle East and between Russia and Ukraine have limited global oil supply. On Sept. 22, oil prices were falling on hopes of renewed U.S.-Iran talks and reports about a key Saudi oil pipeline reopening, but West Texas Intermediate futures remained near $91 a barrel, up 35% since the Iran war began Feb. 28. DaGrosa said mortgage rates are likely to remain elevated but could ease if inflation moderates and long-term yields fall; LendingTree’s Matt Schulz said the effect of Fed moves was uncertain.