Treasury yields lift mortgage rates, but home sales still lag

On Wednesday, the U.S. Treasury sold $39 billion of 10‑year notes at a 5.3 percent yield, confirming strong demand and setting the stage for mortgage rates to rise. The auction showed that investors are willing to pay higher yields for new debt, and the 5.3 percent level is well above the 5.0 percent seen a year ago. With the federal government adding roughly $2 trillion in debt annually, the 10‑year yield is expected to stay elevated unless Congress cuts spending or inflation drops sharply.

Mortgage rates have followed the Treasury trend, climbing from 6.2 percent in October of last year to 7.4 percent this month. Home sales have slipped, with pending sales down 9 percent year over year, while active inventory rose 3.8 percent to 895,398 homes and the median days on market held at 70 days. The higher mortgage rate is cited as a key factor in the current “deep freeze” of the housing market.

The lock‑in effect keeps many homeowners with 2020‑era mortgages at 3.5 percent from switching to a new 7 percent loan, and first‑time buyers are hesitant to pay the higher monthly payment of about $3,300 on a $500,000 loan. Historically, a 7 percent mortgage is normal, but the recent rise in rates has dampened demand. As the Fed continues to buy mortgage‑backed securities, the market may see a rebound in sales once rates stabilize.

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