US mortgage rates are rising as 10-year Treasury yields hit a 19-year high, driven by inflation, oil prices and rising Fed rate hike expectations.

Published on: Sep 15, 2026, 21:26:43 IST

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US mortgage rates are moving higher again as Treasury yields rise. The average rate for a 30-year fixed purchase mortgage reached 7.195%, up from 7.155% a day earlier, according to Zillow data.

Other mortgage rates are also elevated. The average 30-year refinance rate is 7.287%, while the 15-year mortgage rate is 6.349%. The main reason is the rise in the 10-year US Treasury yield. Mortgage rates generally move with the yield on 10-year Treasury notes. The 10-year yield has climbed to its highest level since 2007, putting fresh upward pressure on home loan rates.

Why 10-year Treasury yields matter

Mortgage rates do not directly follow the Federal Reserve's policy rate. Instead, they are closely linked to longer-term borrowing costs, especially the 10-year Treasury yield. When Treasury yields rise, mortgage rates usually move higher too.

Fed rate hike fears push rates higher

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Markets are also preparing for a possible Fed rate hike. Investors are increasingly expecting the Federal Reserve to raise interest rates at its meeting tomorrow. The bond market has been pricing in this possibility, helping push Treasury yields higher.

The Fed does not directly set mortgage rates. However, its decisions on monetary policy affect borrowing costs across the economy and can influence where mortgage rates go, according to U.S. News.

US-Iran war keeps mortgage rates high

The US-Iran war is another major reason mortgage rates have stayed high. Home loan rates have risen since the conflict began in late February. When tensions in the war increase, mortgage rates have generally moved higher along with 10-year Treasury yields.

The opposite has also happened when the conflict appears to ease. When markets see signs that the war could move closer to a resolution, Treasury yields and mortgage rates have tended to fall.

Oil prices add to inflation fears

Oil prices are at the centre of this problem. The Middle East conflict has put upward pressure on crude oil prices. Higher oil prices can increase the cost of making and transporting goods, which can push overall inflation higher.

Oil recently crossed $100 a barrel. Brent crude reached $100 a barrel last week, its first time at that level since July, as tensions in the war escalated. U.S. News reported the rise in oil prices.

Inflation keeps pressure on the Fed

Higher oil prices can mean higher inflation. When energy becomes more expensive, businesses can face higher production and transportation costs. Those costs can eventually show up in prices paid by consumers. That is a problem for the Federal Reserve because inflation is still above its target. The August Consumer Price Index showed inflation running at 3.4% annually, with high energy costs helping keep inflation elevated, according to U.S. News.

The Fed's inflation target is 2%. With inflation at 3.4%, price growth remains well above the central bank's target. Markets have sharply increased their expectations for a Fed rate hike. When the August inflation report was released, the probability of a September rate hike rose to 86%, according to the CME Group FedWatch Tool.

Fed rate hike odds reach 93%

That probability has increased even further. The odds of a September rate hike are now at 93%. Fed officials were already showing concern about inflation. The central bank kept interest rates unchanged at its July meeting, as widely expected.

But the July decision was not completely unanimous. Three Fed policymakers voted for a quarter-point rate hike, while the June meeting had ended with a unanimous decision to keep rates unchanged, according to U.S. News.

Treasury buyback adds more pressure

There is another pressure on Treasury yields: the US government's bond buyback programme. The Treasury has expanded its buyback programme with the aim of helping lower Treasury yields and, in turn, consumer borrowing costs.

But the Treasury's latest buyback was smaller than markets expected. Investors had expected a larger amount to be announced last week. The smaller-than-expected buyback announcement helped push Treasury yields and interest rates higher.

The bigger picture is that mortgage rates are rising because markets are worried about inflation and higher interest rates. The rise in oil prices linked to the US-Iran conflict is adding to those inflation fears, while expectations of a Fed rate hike are pushing Treasury yields higher.

As long as the 10-year Treasury yield remains elevated, mortgage borrowers could continue to feel the pressure. The key question for homebuyers is therefore not just what the Fed does tomorrow, but also where Treasury yields, oil prices and inflation go next.

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