Efforts by the U.S. Treasury to stabilize volatile bond yields gave mortgage rates a temporary pause this week, but federal deficit pressures quickly checked any meaningful drop. With benchmark long-term yields reaching a 19-year high on news the federal deficit reached $1.8 trillion for the first 10 months of fiscal year 2026, the brief reprieve did little to reignite homebuyer demand.
Mortgage rates were a mixed bag this week, depending on the data source. At least one data provider for National Mortgage News,
Another product and pricing engine provider, Optimal Blue, had the conforming 30-year at 6.68% as of Aug. 19, up from 6.65% seven days earlier. On Aug. 18, when the bond market peaked, it had the 30-year FRM at 6.7%.
How long-term bond yield spikes affected the market
"The fact that the 30-year Treasury bond is at the highest yield since 2007 has spooked many fixed-income investors, since as yields rise, principal erodes," investment banker Louis Navellier said in his commentary on Wednesday.
"The good news is the Treasury yield curve is not inverted like it was back in 2020," with Navellier adding the market retreated after Treasury Secretary Scott Bessent
It is a sign "Bessent knows what he is doing and is striving to have a healthy yield curve as well as support the liquidity of long-term Treasury bonds," said Navellier.
On Aug. 17, the 10-year Treasury peaked at 4.75%, and closed at 4.71%. The following day, it fell to 4.65% but on Thursday morning, as of 11:30 eastern time, it was back to 4.71%,
Kara Ng, senior economist at Zillow Home Loans, is not convinced this Treasury action will have a huge effect on mortgage rates.
"Mortgage borrowers should remember that while Treasury yields were mechanically pushed down, the underlying forces behind their rise — the government deficit, oil shock, and AI debt — haven't faded and will likely put a floor under how far mortgage rates can fall," Ng said in a Wednesday afternoon commentary.
What was the change in the Freddie Mac survey rate?
For the
The 15-year FRM declined to 5.95% from last week's 5.96%. However, it is 26 basis points higher than the 5.69% it averaged for the same week in 2025.
"With a dip in rates providing modest relief for homebuyers, it's important to remember borrowers can potentially save thousands by shopping around for the best mortgage rate," said Sam Khater, Freddie Mac's chief economist in a press release.
Zillow had mortgage rates moving lower in the aftermath of the expanded Treasury buybacks. Going forward, rates should continue to drift lower, but only marginally, Ng said.
"The news was just favorable enough for mortgage rates to ebb a little this week," added NerdWallet's lending expert Kate Wood, in a Thursday morning commentary. "Nothing too dire out of Iran, Fed meeting minutes that didn't offer up any real drama, and a surprise move from the Treasury that provided a bit of help but probably won't be a game changer."
The U.S. dollar also stabilized on Thursday, after dropping alongside the long-term yields, said Bas Kooijman, the CEO and Asset Manager of DHF Capital, in a Thursday morning comment.
"Such operations could keep a lid on long-term Treasury yields and weigh on the currency," Kooijman pointed out. "However, downside risks could still be limited with the Federal Reserve indicating a willingness to tighten if inflation does not return to the 2% target."
Outlook for next month's FOMC meeting
No change is expected at the Federal Open Market Committee September meeting, but a rate hike is priced in by investors for the end of the year, which is likely to keep yields and the dollar support, especially if inflation data show no signs of slowing down, Kooijman said.
July's Personal Consumption Expenditures Price Index data, to be released next week, could firm up
"If PCE comes in as currently predicted — the tiniest amount of improvement versus June — the odds of a September rate hike will plummet," Wood said. "Stability's already been the likelier outcome for a minute, though, so an on-target PCE wouldn't have much impact on mortgage rates."
Mortgage application volume from the past week
The Mortgage Bankers Association's Weekly Application Survey for the period ended Aug. 14 was virtually flat from the previous seven days, with a 0.4% drop in activity, with a 2% decline in purchase offsetting a 2% rise in refnancings.
The conforming 30-year FRM was unchanged at 6.77%, while the jumbo rose to 6.71%, keeping the inversion in place.
"The steady rise in mortgage rates this summer has dampened borrower demand, with overall application activity remaining relatively flat last week," said MBA President and CEO Bob Broeksmit in a Thursday morning statement. "Looking ahead, affordability pressures are likely to keep purchase activity constrained until mortgage rates moderate and provide prospective buyers with greater incentive and purchasing power."
Purchase activity, which Keefe, Bruyette & Woods analyst Bose George, described as lackluster so far this year, was down 3.4% from one year prior, while refinancings were off by 18.4%.
"We think volumes will continue to be weak given the recent increase in mortgage rates, which is likely to keep refinance activity low while purchase is slowing both on higher rates and seasonality, as the selling season winds down," George said in a flash note on the application survey data. "This backdrop will continue to pressure mortgage originators," although George remains positive on "servicing-heavy"
