Mortgage rates haven’t just drifted higher, they’ve exploded.
The average 30-year mortgage rate more than doubled since 2020, hovering near 7.25% today.
But this didn’t happen in a vacuum. It’s the domino effect of one number: the 10-year U.S. Treasury yield. Here’s why 👇
— StockMarket.News (@_Investinq) June 9, 2025
Now, even though mortgages are technically 30-year loans, most people refinance or sell within 7–10 years.
So lenders and investors treat a 30-year mortgage like a 10-year loan.
That’s why the 10-year Treasury is the benchmark for fixed mortgage rates but…
— StockMarket.News (@_Investinq) June 9, 2025
So what makes the 10-year yield go up in the first place? In short: inflation, the Fed, the economy, and debt.
Let’s walk through it. Yields rise when:
– Inflation heats up (investors demand higher returns)
– Fed raises interest rates
– Government issues more debt
– The economy…— StockMarket.News (@_Investinq) June 9, 2025
This is where Federal Reserve policy enters the chat. While the Fed doesn’t directly set mortgage rates, it heavily influences them through two channels:
→ The federal funds rate (short-term rate banks use)
→ Quantitative easing or tightening (QE/QT)Here’s how 👇
— StockMarket.News (@_Investinq) June 9, 2025
In Quantitative Tightening, the Fed sells bonds or lets them mature, removing demand from the market.
Less demand = lower prices = higher yields.
Since April 2022, the Fed has cut $300B+ of MBS from its balance sheet, fueling the mortgage rate surge but wait there’s more.
— StockMarket.News (@_Investinq) June 9, 2025
MBS investors face two big risks:
→ Prepayment risk: Homeowners refinance when rates drop, cutting the investor’s income stream early.
→ Credit risk: Borrowers might default.To account for that, investors demand a premium, raising the mortgage rate further.
— StockMarket.News (@_Investinq) June 9, 2025
So here’s the flow: Fed raises rates ➝ Treasury yields rise ➝ MBS prices fall ➝ Investors want more yield ➝ Mortgage spreads widen ➝ Mortgage rates surge
It’s a chain reaction, and it’s crushing housing affordability.
But the damage doesn’t stop at the front door.
— StockMarket.News (@_Investinq) June 9, 2025
In fact, home sales hit a 30-year low in 2024.
And with construction squeezed by both high rates and tariffs on materials like steel and aluminum, new builds are drying up.
That shrinks future housing supply and deepens long-term affordability issues.
— StockMarket.News (@_Investinq) June 9, 2025
Historically, this isn’t new. In 1981, the 10-year Treasury hit 15%, and mortgage rates topped 18%. Housing froze.
In 2008, the Fed slashed rates and bought $1.5 trillion in MBS to prop up the market.
In 2020, it did it again, rates fell under 3%. Today? There’s no easy fix.
— StockMarket.News (@_Investinq) June 9, 2025
And even if mortgage rates do drop? We still face a deeper crisis: structural affordability.
– Home prices outpaced wages for years
– Zoning and regulation limit new supply
– Construction costs are rising
– Investor-owned housing stock keeps growingRates are just one piece.
— StockMarket.News (@_Investinq) June 9, 2025
Bottom line? The housing market is caught in a storm of financial mechanics most people never see:
Rising Treasury yields ➝ widening spreads ➝ fading MBS demand ➝ frozen homebuying ➝ economic drag
And the Fed’s toolkit though powerful isn’t magic.
— StockMarket.News (@_Investinq) June 9, 2025