cut will not be enough to break up the housing market logjam,” says Sturtevant. “We will need to see further drops in mortgage rates and much slower home price growth, or even home price declines, to make a dent in affordability.”
Factors Influencing Mortgage Rates
Mortgage rates are not directly set by the Federal Reserve but influenced by investor appetite for 10-year Treasury bonds. When market uncertainty rises, investors tend to buy these bonds, driving yields—and often mortgage rates—downward.
The U.S. economy seems to be losing steam due to President Donald Trump’s tariff policies, which have contributed to inflation moving up to 2.9 percent in August, far from the Federal Reserve’s target of 2 percent. The 10-year Treasury yield was below 4 percent as of Wednesday afternoon.
Another risk is the political climate, with the federal government shutdown continuing and impacting confidence about the U.S. economic outlook.
Expert Perspectives
Mark Hamrick, Bankrate’s senior economic analyst, notes that the labor market has shown significant downside risks, with both supply and demand for labor declining sharply. “With the U.S. federal government shutdown continuing, my sense is that confidence about the U.S. economic outlook is being undermined,” says Hamrick.
Meanwhile, expectations of a Federal Reserve cut in interest rates are influencing mortgage rates positively. However, the Fed decided to leave the federal funds rate untouched for most of 2025 despite recent job market weakness and inflation concerns.
Methodology and Conclusion
The Bankrate.com national survey of large lenders is conducted weekly, gathering rate information from the 10 largest banks and thrifts in 10 large U.S. markets. The Market Analysis team gathers rates on banking deposits, loans, and mortgages using a consistent methodology for over three decades.
While lower mortgage rates may bring some relief to home buyers, significant further drops are needed to substantially boost housing market activity. The continued uncertainty in the economy, political climate, and inflation pressures will likely keep mortgage rates at historically high levels for the near future.
