Mortgage rate decline ends as Treasury yields edge higher

Investor concerns over economic and foreign policy uncertainty have halted the seven-week decline in mortgage rates, pushing the 10-year Treasury yield higher this week.

As of 11 a.m. eastern time on Thursday, the 10-year Treasury yield was up five basis points from its March 6 close, to 4.33%.

During the seven-day period, the yield moved up 3 basis points on March 7, dropped 10 basis points the following Monday to 4.21% but then started rising again.

As a result, the 30-year fixed rate mortgage increased 2 basis points from the prior week to 6.65%, the Freddie Mac Primary Mortgage Market Survey reported. For the same week last year, it was 6.74%.

Meanwhile the 15-year FRM for March 13 rose 1 basis point compared with last week to 5.8%. It was at 6.16% one year ago.

Purchase applications rose 5% and the combination of primarily low mortgage rates and rising inventory of homes for sale is a good sign for the Spring home purchase market, Sam Khater, Freddie Mac's chief economist, said in a press release. 

While rates edged slightly higher this week, they remain close to December levels, suggesting some stability despite market jitters.

The Lender Price product and pricing engine data posted on the National Mortgage News website on Thursday morning put the 30-year FRM at 6.815%, virtually unchanged from Wednesday and 1 basis point higher than one week prior.

Other rate trackers also show a slight increase, with Zillow reporting a similar uptick. Based on offers made through its site, Zillow's average interest rate was at 6.4%, up 2 basis points from the prior day and 12 basis points from the prior week's average of 6.28%.

But economists caution that while mortgage rates remain relatively low, the outlook remains uncertain.

"February consumer confidence registered the sharpest drop in three-and-a-half years, which, if sustained, may limit U.S. household willingness to spend," said Kara Ng, senior economist at Zillow Home Loans. "Small businesses — which likely have more difficulty navigating tariffs than larger firms — show a deteriorating outlook."

The recent jobs and Consumer Price Index reports, while relatively positive, are not likely reflecting any impact of government layoffs or tariffs. A cooling labor market, combined with rising inflation, which those could lead to, puts the Federal Reserve in a tough position, Ng continued.

"Right now markets are spooked on economic growth, but the market narrative could easily shift again to upside inflation concerns and cause mortgage rates to rise again," Ng said.

Homeowners who are looking to buy right now shouldn't try to time the market for when rates fall, she explained.

Nigel Green, CEO of financial advisor the deVere Group, agreed with Ng about the Fed being in a precarious position regarding short-term rate cuts. But he said it needs to act sooner rather than later.

"This is a moment for the Fed to lead rather than lag," Green said in a commentary. "[Jerome] Powell and his colleagues have signaled their data-dependent approach, but the data is clear: inflation is cooling, the economy is slowing, and the risks of inaction outweigh the risks of premature easing."

Taking more of a wait-and-see approach is First American Senior Economist Sam Williamson.

"[The] small downside surprise in [the] CPI report is an encouraging sign for the Federal Reserve's ongoing effort to bring down inflation," Williamson said. "However, the modest improvement is still not enough to prompt a March rate cut, but it does potentially give the Fed greater flexibility to consider more rate cuts later this year."

While the Fed does not control short-term rates, its reaction to what is happening in the economy does have an impact on the investor-driven 10-year yield and thus mortgage rates.