Bond Market Could Keep Mortgage Rates Elevated

Mortgage borrowers may need to watch Treasury yields as closely as Federal Reserve decisions. Selma Hepp, Cotality’s chief economist, said long-term bond-market forces are now the stronger influence on home-loan pricing. The 30-year fixed mortgage rate was 7.5% during her CNBC appearance.

Hepp said 9% mortgages are possible, but not her central expectation. That outcome would likely require 10-year Treasury yields to reach roughly 6% or 7% after several major disruptions. The 10-year yield briefly moved down to about 5.18%-5.21% after a weak September employment report, then ended the day at 5.252%, compared with 5.234% previously. The report showed 29,000 jobs added, reducing traders’ expectations for an October Fed increase.

High borrowing costs are already discouraging homeowners with pandemic-era loans below 3% from selling, a lock-in effect expected to weigh on U.S. housing activity through the rest of 2026. Builders are among the groups benefiting, using incentives and temporary rate reductions to make payments more manageable for buyers. Housing professionals are planning around rates staying high for longer, rather than assuming a Fed change alone will revive sales.