10-year Treasury yield pushes mortgage rates to recent highs
Long-term Treasury yields are raising borrowing costs, with Freddie Mac reporting mortgage rates at their highest levels in months.
By Jordan Bell · Startups & Deals Reporter
· 3 min read
The 10-year Treasury yield, mortgage rates and other consumer borrowing costs are moving together again, and that is making debt more expensive for households. The Federal Reserve sets national rate policy, but bond investors are playing a major role in what consumers pay on long-term loans.
The yield on the 10-year U.S. Treasury note ended Thursday near 4.7%, its highest close since January 2025. Many consumer loans, especially mortgages and auto loans, are influenced by that benchmark because lenders use it as a reference point for longer-term borrowing costs.
Freddie Mac said the average rate on a 30-year fixed mortgage rose to about 6.6% on Thursday, the highest since August 2025. The 15-year fixed mortgage rate climbed to about 6%, its highest level since June 2025, according to Freddie Mac’s weekly data.
Those higher loan costs are hitting at the same time as other household pressures. The Energy Information Administration reported average gasoline prices above $4 a gallon this week amid renewed tensions in the Iran war. Economists also say new Trump administration tariffs on dozens of countries, imposed Friday, raise costs for companies and consumers.
Why do Treasury yields affect mortgage rates?
A Treasury yield is the return investors demand to lend money to the U.S. government. When investors require a higher return on 10-year Treasurys, lenders often raise rates on products tied to longer borrowing periods, including home loans and some auto loans.
The Fed’s main tool is the federal funds rate, a short-term benchmark. Chad NeSmith, a certified financial planner and director of investments at Tobias Financial Advisors in Plantation, Florida, told CNBC that the Fed’s benchmark has a more direct effect on short-term borrowing, including credit cards and other variable-rate loans.
Longer-term Treasury yields are more directly shaped by bond investors. CNBC reported that experts point to investors’ expectations for inflation and future Fed policy as major forces behind those moves.
If investors think inflation will stay high or rise, they usually seek higher yields to offset the risk that future interest payments will lose purchasing power. Thomas Ryan, a North America economist at Capital Economics, told CNBC that bond investors are effectively pricing their view of the economy, and that feeds through to consumer borrowing rates.
What is pushing yields higher now?
Inflation has remained above policymakers’ target for more than five years, according to CNBC. Oil prices also jumped in July as Middle East tensions increased, and NeSmith told CNBC that persistently expensive oil can show up in prices for airline tickets, transportation and goods.
Capital Economics expects the Fed to raise interest rates three times this year. Ryan told CNBC that the firm’s view is tied less to oil alone and more to a broader read that inflation is running hot.
For consumers, housing may be the clearest pressure point. NeSmith told CNBC that higher Treasury yields can make it harder to buy or sell a home because many owners with lower pandemic-era mortgage rates may feel stuck, while new buyers face much higher monthly payments.
Auto buyers may also feel the effect if higher rates make financing less affordable. NeSmith told CNBC that more expensive borrowing can slow spending because households need to take on larger interest costs to make major purchases.
This story draws on original reporting from CNBC.
