Despite widespread anticipation of a Federal Reserve rate cut, 30-year fixed mortgage rates climbed to 7.2% this week, defying expectations. The move reflects growing market skepticism about the Fed's ability to ease monetary policy meaningfully.
- 30-year fixed mortgage rates rose to 7.2% amid expectations of a Fed rate cut
- 10-year Treasury yield climbed to 4.35%, reflecting market skepticism
- TLT declined 1.8% over five days, indicating bond market stress
- SPY dropped 0.6%, with consumer-discretionary and real estate sectors under pressure
- DX-Y.NYB reached 106.8, highlighting dollar strength and its impact on inflation expectations
- MBA purchase index fell 3.2%, signaling weakening housing demand
Mortgage rates have jumped to 7.2% for the 30-year fixed loan, up 15 basis points from last week, according to the Mortgage Bankers Association (MBA). This rise occurred even as markets price in a 75% probability of a 25 basis point Fed rate cut during the upcoming December meeting. The divergence signals that investors are pricing in stronger underlying economic momentum than previously assumed. The Treasury market reflected this shift, with the 10-year yield rising to 4.35%, while the iShares 20+ Year Treasury Bond ETF (TLT) slid 1.8% over the past five trading sessions. The movement underscores renewed concerns about persistent inflation pressures, even as core PCE data remains elevated. The SPDR S&P 500 ETF (SPY) dipped 0.6% as higher borrowing costs dampened sentiment in consumer-discretionary and real estate sectors. The strength in the U.S. dollar index (DX-Y.NYB), which climbed to 106.8, also contributed to the bond market selloff. A stronger dollar typically reduces inflationary pressure on imports but can weigh on export-driven equities and increase the cost of servicing dollar-denominated debt. This dynamic has intensified scrutiny on the Fed’s dual mandate, particularly as housing affordability continues to deteriorate. Homebuilders and mortgage lenders now face mounting headwinds, with the housing market’s momentum slowing. The MBA’s purchase index dropped 3.2% week-over-week, and existing-home sales are down 9.4% year-over-year. Investors are reevaluating the timing and size of rate cuts, with the market now pricing in only one 25-basis-point cut in 2026, down from three earlier in the month.