First things first: if we politely ignore the last five days for a moment, today’s mortgage rates are still the lowest we’ve seen since early 2023. That’s the good news.
The not-so-dramatic news? Over the past week, rates inched a bit higher after briefly flirting with even lower levels. No fireworks—just a gentle nudge upward.
Now, why does this matter? Because a lot of headlines rely on Freddie Mac’s weekly mortgage rate survey, which drops every Thursday. The problem? Freddie’s data completely missed last Friday’s sharp drop in rates and also didn’t catch the slow climb we’ve seen throughout this week. Timing, as always, is everything.
That big drop last week happened after Fannie Mae and Freddie Mac (together known as “the GSEs”) announced they’d be buying a cool $200 billion of mortgage-backed securities (MBS)—the bonds that have a very direct say in where mortgage rates go.
Now, GSE MBS purchases don’t magically control the entire bond market, but they do help mortgage rates behave better than their usual benchmark: the 10-year Treasury yield. That’s especially helpful right now, considering the 10-year Treasury just broke out of its recent comfort zone and started wandering upward.
Thanks to those MBS purchases, we’re seeing a pretty stark contrast between mortgage rates and Treasury yields. Normally, these two move in a fairly synchronized dance. But several months ago, they started stepping on each other’s toes.
Looking back, we now know Fannie and Freddie were already buying MBS before last week’s official announcement, which helps explain why these two lines started drifting apart. Friday’s news just confirmed what the chart was already hinting at.
One important note about that chart: each line uses its own axis so we can clearly see how they’re performing relative to each other. If we forced them to share a single axis, the picture would look… a bit less dramatic.
So here’s the short version: the broader bond market has been pushing rates upward, but GSE MBS purchases have more than neutralized that pressure for mortgage rates.
Put another way: if Treasury yields had been moving down instead of up over the past few weeks, we’d probably be talking about average top-tier 30-year fixed rates well below 6%. Yes, really.
Which brings us to the big question: can Treasuries find some friendlier momentum?
That’s still very much up for debate. While yields may have popped above their recent range, zooming out shows this move is just a small ripple in a much larger pond. Bonds are still consolidating within a wide range, waiting for a better reason to truly break one way or the other.
So what actually drives bond momentum?
A few big things—but Treasury issuance is one of the most important. And with current deficit and spending levels, issuance isn’t exactly shrinking. Translation: rates aren’t heading back to the ultra-low glory days of 2020–2022 anytime soon.
That said, improvement is still possible if other pieces fall into place—mainly economic data, especially inflation and the labor market.
This week’s inflation data didn’t cause any trouble, but inflation also isn’t falling fast enough to give rates a strong tailwind.
The labor market, meanwhile, has been even more of a buzzkill for rates. Markets clearly took notice of Thursday’s jobless claims report—an indicator that usually flies under the radar. This time, though, the numbers came in much stronger than expected.
And remember: strong jobs data is great for workers, but not so great for mortgage rates.
Mortgage rates nudged higher this week, but they’re still sitting near multi-year lows thanks to aggressive MBS purchases by Fannie and Freddie. The bond market is waiting for clearer signals—especially on inflation and jobs—before making its next big move. Until then, expect a bit of sideways shuffling… and fewer heart attacks than the headlines might suggest.