Treasury yields and mortgage rates rise as inflation worries persist
The 10-year Treasury yield reached about 4.7%, lifting mortgage and auto borrowing costs as inflation concerns pressure households.
By Sarah Jenkins · Chief Macro Economics Correspondent
· 3 min read
Treasury yields and mortgage rates have climbed together, adding pressure to household finances as investors demand more compensation to hold longer-term U.S. government debt. The 10-year Treasury yield closed Thursday at about 4.7%, its highest level since January 2025, while Freddie Mac said the average 30-year fixed mortgage rate rose to about 6.6%, the highest since August 2025.
The Federal Reserve sets the national interest-rate benchmark, but longer-term consumer borrowing costs are often shaped by the Treasury market. Rates on mortgages and auto loans generally track the 10-year U.S. Treasury yield, so higher yields can translate into more expensive borrowing for households.
Freddie Mac’s weekly data also showed 15-year fixed-rate mortgages near 6% this week, the highest since June 2025. The rise comes as consumers face several other cost pressures, according to economists cited by CNBC.
Average U.S. gasoline prices moved back above $4 a gallon this week amid renewed tensions in the Iran war, according to the Energy Information Administration. The Trump administration also imposed new tariffs on dozens of countries on Friday. Economists say tariffs increase costs for companies and consumers by taxing imported goods.
Inflation has remained above policymakers’ target for more than five years, and economists said the household support from comparatively large spring tax refunds appears to have faded.
Thomas Ryan, a North America economist at Capital Economics, described the increase in Treasury yields as another burden for consumers already dealing with affordability strains. He told CNBC that his firm does not see much near-term relief on borrowing costs.
Why do Treasury yields affect mortgage rates?
The Fed’s federal funds rate has a more direct effect on short-term borrowing costs, including credit cards and variable-rate loans, according to Chad NeSmith, a certified financial planner and director of investments at Tobias Financial Advisors in Plantation, Florida. Longer-term rates, including the 10-year Treasury yield, are driven more by bond investors’ views on inflation and the path of Fed policy.
When investors expect inflation to stay high or rise, they typically require higher yields on longer-term bonds to offset the risk that inflation will reduce the value of future interest payments. Ryan told CNBC that investors are pricing their own assessment of conditions, which then affects the rates consumers can obtain when they borrow.
Oil prices are one factor feeding those concerns. CNBC reported that oil rose sharply in July as Middle East tensions escalated. NeSmith said sustained high oil prices can pass through to broader costs, including airfares, transport expenses and goods prices.
Capital Economics expects the Fed to raise interest rates three times this year, Ryan said, based less on oil prices alone than on a broader view that inflation remains elevated.
How higher rates hit households
NeSmith said the biggest effect for consumers is likely in housing. Mortgage rates are more than twice their pandemic-era levels, and experts cited by CNBC said they could move above 7%.
Higher rates can reinforce the housing market’s lock-in effect, NeSmith said, as homeowners with lower existing mortgage rates may feel unable to sell and take on a new loan at a higher cost. Buyers face reduced affordability when monthly payments rise for the same home price.
Auto purchases may also be affected. NeSmith said consumers who cannot secure an affordable car loan may delay buying a vehicle, reducing spending because borrowing has become more expensive.
This story draws on original reporting from CNBC.
