Mortgage rates double pandemic levels as higher rates hit housebuilding
The 10-year US Treasury note hit its highest yield since 2023 on Tuesday before registering 4.8 percent on Wednesday. The yield had stood at 3.95 percent at the end of February, and its rise through the spring and summer threatened to make consumer and business borrowing more expensive if the bond selloff continued.
Americans who had grappled with higher living costs over the previous several years faced bond-market trouble that could keep costs elevated. Mortgage rates were already twice their pandemic-era levels, and higher rates had already hit housebuilding. Credit-card interest rates could also be affected, while Jacquez reported rising balances, defaults and use of credit for basic expenses as separate trends.
Small bond-market fluctuations are normal, but Treasury yields continued rising over the summer. The increase began in the spring, when the United States first declared war in Iran, according to The Guardian.
The yield on the 30-year Treasury fell sharply earlier in the summer while the United States and Iran observed a temporary ceasefire. Oil prices fell to their lowest levels since the war began at that time and had risen since then.
The Guardian reported that concerns about rising inflation, the continuing war with Iran and the record US national debt had shaken the market and slowed demand for Treasuries. Higher yields pointed to concern about inflation, which had increased significantly since the start of the Iran war.
Bond-market activity can offer more insight into investors’ views of the US economy than the stock market, according to The Guardian. Industries performing particularly well, including artificial intelligence and technology, can give stock indexes outsized boosts even when other parts of the economy fare worse.
US government bonds, known as Treasuries, are supposed to be the most stable type of investment vehicle. A Treasury bond packages government debt for sale to investors with a promise to pay interest. Investors can select securities with different maturities: a two-year note returns the principal faster than a 30-year bond but typically pays less interest.
Investors measure the market through each bond’s yield, or the return a buyer can expect when the bond matures. The yield fluctuates with the bond’s price. A higher yield means more investors are trying to sell their bonds and are willing to offer a higher return to attract buyers.
Mortgages closely track the Treasury market, with mortgage rates expected to follow when yields rise. The 30-year fixed-rate mortgage fell below 6 percent in February, reaching its lowest level since 2022, but stood at 6.66 percent at the end of August. Rates were expected to rise further after the bond-market selloff.
If the selloff continues, loans for homes and cars, credit-card borrowing and money that businesses borrow to keep operating could all become more expensive. The Guardian reported that other loans, including car loans and the interest rates consumers pay on credit cards, will also be affected.
Housebuilding had already been hit by higher rates. The Guardian reported that a further blow will ripple through the economy, affecting construction jobs and sales of white goods.
Jacquez, senior vice-president of policy, advocacy and research at the progressive think tank Groundwork Collaborative and a former economic adviser to the Biden administration, said higher borrowing costs would be especially painful for Americans whose savings had been depleted after years of high inflation.
“We’ve seen credit card balances start to creep back up, defaults start to creep back up,” Jacquez said. “More and more people are turning to credit instruments to pay down all kinds of basic things like healthcare, groceries and gas.”
Investors were bracing for the Federal Reserve to raise interest rates at least once before the end of the year. The Guardian reported that such an increase would make borrowing more expensive even if the bond market calmed.
The bond-market trouble followed a major US borrowing milestone. Gross national debt topped $40 trillion for the first time in history last month. The Guardian reported that Trump had shown little interest in his pre-election pledge to balance the US budget.
US Treasury Secretary Scott Bessent announced that the department would triple its buyback of US Treasuries from $2 billion to $6 billion as an intervention intended to stabilize the bond market. The announcement briefly calmed the Treasury market but did little to ease investor concerns about inflation, and yields soon began rising again.
Earlier in the month, Trump announced that the United States had bought Japanese yen to strengthen the currency. The Guardian reported that the purchase was seen as a move to support the Japanese government, a major owner of US bonds.
Billionaire investor Stanley Druckenmiller, Bessent’s former mentor, criticized the Treasury intervention, saying “governments defending prices against fundamentals always lose.”
Jacquez said the Trump administration had few options if it continued pursuing policies he described as inflationary, including continued conflict in the Middle East and new tariffs on close trading allies.
“First and foremost, they should stop getting in their own way,” Jacquez said. “It’s no wonder that people are expecting more inflation in the months to come.”
The Guardian accompanied its report with a photograph by Lori Van Buren of the Albany Times Union, distributed through Getty Images, showing shoppers at a newly opened Costco in Guilderland, New York, on August 6, 2026.