Tag: federal reserve (Page 1 of 5)

Why Mortgage Rates Moved Higher After the Iran Attack: An Economic Breakdown

March 23, 2026 / Tom Bonetto / 0 Comments

anonymous person magnifying view of coins shaped in world map

Mortgage rates don’t move randomly—they are the result of large, interconnected financial markets reacting to risk, inflation, and economic data.

a large ship is traveling through the water

The recent spike in rates following the late-February Iran attack is a textbook example of how global events quickly ripple into the U.S. housing and mortgage market.

Let’s break it down into the key components driving this shift…

1. The Relationship Between the 10-Year Treasury and Mortgage-Backed Securities

At the core of mortgage pricing is the relationship between the 10-year U.S. Treasury yield and mortgage-backed securities (MBS). While mortgage rates are not directly tied to Treasuries, they tend to follow the same general direction.

The 10-year Treasury acts as a benchmark for long-term interest rates because it reflects investor expectations around inflation, economic growth, and risk.

Mortgage-backed securities, which are bundles of home loans sold to investors, must offer a competitive return relative to Treasuries. When Treasury yields rise, MBS yields must rise as well to attract investors—and that translates into higher mortgage rates for consumers.

There is typically a spread between the 10-year Treasury and mortgage rates (often 1.5% to 2.5%), but the direction of movement is what matters most.

When investors demand higher returns due to increased risk or inflation expectations, both Treasury yields and mortgage rates move upward together.

2. Why the 10-Year Treasury Jumped from 3.95% to 4.39%

The move in the 10-year Treasury from 3.95% on February 27 to approximately 4.39% by March 20 was driven by a combination of global and domestic economic pressures—most of which trace back to inflation expectations.

Energy Shock and Inflation Concerns

The Iran conflict triggered a sharp disruption in global energy markets, with oil prices surging due to supply concerns and instability in key shipping routes.

aerial view of industrial oil tanks in desert landscape

This created immediate inflation pressure across transportation, manufacturing, and consumer goods.

When inflation expectations rise, bond investors demand higher yields to compensate for the erosion of purchasing power. That alone puts upward pressure on the 10-year Treasury.

Supply Chain and Global Risk Premium

Beyond oil, the conflict introduced broader supply chain uncertainty. Disruptions in energy and trade routes raised concerns about prolonged inflation and slower global growth—a combination often referred to as “stagflation.”

Investors began pricing in the possibility that inflation would remain elevated longer than previously expected, pushing yields higher.

Treasury Market Sell-Off

As inflation expectations increased, investors sold off longer-term bonds. This sell-off directly causes yields to rise.

Market strategists noted that the move higher in yields reflected concern over the long-term economic consequences of sustained conflict and rebuilding costs.

Stronger Inflation Data

At the same time, domestic inflation readings reinforced the trend. Producer prices rose more than expected in February, signaling that inflation pressures were not easing—and may actually be accelerating due to energy costs.

Put simply: higher inflation expectations + global uncertainty + bond selling = higher Treasury yields.

3. The Labor Market, the BLS Report, and the Fed’s Dilemma

Complicating the picture further is the labor market.

The February 2026 jobs report showed a loss of 92,000 jobs, a meaningful downside surprise that signals a softening economy.

Job losses were broad-based, including declines in healthcare, government, and transportation sectors.

This puts the Federal Reserve in a difficult position because of its dual mandate:

Price stability (controlling inflation)
Full employment (supporting job growth)

Right now, those two goals are moving in opposite directions.

Inflation remains elevated, with readings still above roughly 2.8% and rising pressures tied to energy and supply chains.
Employment is weakening, with rising unemployment and declining job growth.

roll of american dollar banknotes tightened with band

This creates a classic policy bind. If the Fed cuts rates to support the labor market, it risks fueling inflation further. If it keeps rates elevated to fight inflation, it risks worsening job losses.

As a result, the Fed has taken a cautious “wait-and-see” approach, holding rates steady while signaling limited flexibility in the near term.

For mortgage markets, this uncertainty tends to push rates higher—not lower—because investors demand a premium for that uncertainty.

4. What to Expect for Mortgage Rates Over the Next 60 Days

Looking ahead, mortgage rates are likely to remain volatile, but there are a few clear themes shaping the next 60 days:

Continued Volatility

Markets are reacting quickly to headlines around energy prices, inflation data, and geopolitical developments. Expect mortgage rates to move frequently—sometimes daily.

Upward Pressure with Occasional Relief

The baseline trend is slightly upward due to persistent inflation concerns. However, temporary dips are very possible if:

Energy prices stabilize
Economic data weakens further
Markets shift toward recession concerns

A Narrow Trading Range

In practical terms, mortgage rates are likely to trade within a defined range rather than move sharply in one direction. The bond market is balancing two competing forces:

Inflation pushing rates higher
Economic slowdown pushing rates lower

Key Data to Watch

Over the next two months, the most important drivers will be:

Inflation reports (CPI and PPI)
Labor market data
Oil and energy prices
Federal Reserve guidance

Final Thoughts

The recent rise in mortgage rates is not random—it’s the direct result of global economic forces feeding into the bond market.

The combination of higher inflation expectations, geopolitical uncertainty, and a weakening labor market has created a complex environment where rates can rise even as parts of the economy slow.

For buyers and homeowners, the key takeaway is this: mortgage rates are being driven more by inflation and global risk than by traditional economic cycles.

That means staying informed—and being prepared to act when opportunities present themselves—is more important than ever.

Do reach out directly to me to talk strategy in today’s market!

As always, you can set up an appointment with me here…

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Starlight Mortgage. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

The Lending Coach 2026 Forecast: A Deeper Look at the Economy, Rates, and Real Estate

January 9, 2026 / Tom Bonetto

As each year comes to a close, homeowners, buyers, and real estate professionals naturally start looking ahead. The questions are familiar — but the stakes always feel higher.

Where is the economy headed?
Will mortgage rates finally come down?
What does all of this mean for home prices and opportunity in real estate?

Let’s walk step by step through the key forces shaping the year ahead.

Rather than focusing on headlines or short-term noise, this outlook looks at the underlying drivers that influence interest rates, housing demand, and long-term opportunity.

1. The Economics: Inflation, Employment, and the Foundation of the Market

Economic conditions sit at the core of every housing and mortgage decision.

Inflation, employment, and consumer behavior all feed directly into interest rates — and ultimately affordability.

At first glance, inflation appears stubbornly above the Federal Reserve’s 2% target. However, a deeper look shows that inflation is meaningfully overstated, primarily due to how shelter costs are calculated.

Housing inflation is reported with long delays. Government agencies only survey a portion of the country each month, and rent data often reflects lease agreements signed many months earlier.

Meanwhile, real-time data sources show rents declining across much of the country — a trend that has not yet been fully captured in official inflation reports.

Shelter costs carry enormous weight in inflation metrics:

More than one-third of headline CPI
Nearly half of core CPI

This means even small delays or distortions in housing data can significantly skew inflation readings. When adjusted for these delays — along with temporary factors like tariffs and portfolio fee calculations — true inflation appears much closer to the Fed’s target than reported figures suggest.

In fact, today’s Truflation number is right at 2% as of this writing. More on that here…

At the same time, the labor market is clearly weakening. Job openings have steadily declined, private payroll data has shown multiple months of job losses, and unemployment continues to trend higher.

Initial jobless claims may appear low, but they no longer tell the full story. In today’s gig-based economy, many displaced workers turn to alternative income sources rather than filing unemployment claims — which understates the true level of labor market stress.

The economic takeaway:
Inflation is cooling faster than headlines suggest, while employment conditions are deteriorating — a combination that historically leads to lower interest rates and policy intervention.

2. The Federal Reserve: Policy Direction and the Shift Toward Rate Cuts

The Federal Reserve operates under a dual mandate: controlling inflation and maintaining maximum employment.

As inflation pressures ease and labor weakness becomes harder to ignore, the Fed’s priorities naturally begin to shift.

Looking ahead to 2026, several important factors suggest a more accommodative Fed:

A voting composition that leans more dovish
Rising unemployment
Inflation readings that continue to drift lower as shelter data catches up

While most forecasts call for minimal rate cuts in 2026, I actually anticipate a more proactive response. My outlook calls for three quarter-point cuts, bringing the Fed Funds rate down to approximately 2.875%.

This expectation is based on two key assumptions:

Inflation is less threatening than official numbers suggest
The labor market is weaker than widely acknowledged

When those realities become undeniable, the Fed historically acts to prevent deeper economic damage.

Why this matters:
Although the Fed does not directly set mortgage rates, its policy decisions heavily influence bond markets, investor confidence, and the cost of borrowing across the economy — all of which feed into mortgage pricing.

3. Mortgage Rates: Understanding the Path to Lower Borrowing Costs

Mortgage rates are primarily driven by two components:

The 10-year Treasury yield
The spread between Treasury yields and mortgage-backed securities

For 2026, I project the 10-year Treasury reaching a low near 3.85%, supported by:

Slowing economic growth
Lower inflation expectations
Fed rate cuts
Increased demand for bonds

In recent years, mortgage rate spreads widened significantly due to volatility, uncertainty, and reduced demand for mortgage-backed securities. As market confidence improves, these spreads are expected to normalize toward historical ranges.

Historically, mortgage spreads typically fall between 1.6% and 2.0%. While current levels remain elevated, continued normalization could place spreads closer to the middle of that range.

Combining these factors:

A 10-year Treasury near 3.85%
A spread near 1.9%

This supports a projected 30-year fixed mortgage rate around 5.75%, with the potential to move closer to 5.625% if conditions improve further.

For homeowners and buyers:
Lower rates improve affordability, unlock refinancing opportunities, and act as a catalyst for increased housing activity.

4. Real Estate: Supply, Demand, and the Return of Buyer Activity

Housing demand has cooled sharply in response to higher mortgage rates, but this decline should not be confused with a lack of interest in homeownership.

Instead, the market is experiencing pent-up demand — buyers who are financially ready but waiting for affordability to improve.

At the same time, housing supply remains constrained:

Builders have reduced new construction to match slower demand
Inventory remains below pre-pandemic levels when adjusted for population growth
Active listings have risen from historic lows but are now beginning to flatten

As mortgage rates ease, demand is expected to return faster than supply can respond. Builders cannot ramp up production overnight, and existing homeowners remain hesitant to sell unless affordability improves.

This imbalance supports:

Increased transaction volume
Stabilizing inventory
Continued upward pressure on home prices

While appreciation will vary by market, the national picture suggests a return to more typical, sustainable growth rather than the extremes of recent years.

5. The Lending Coach Forecast: What 2026 May Bring

Based on economic trends, policy expectations, and housing fundamentals, my 2026 forecast includes:

Unemployment: Rising toward 4.8%, potentially higher
Core Inflation: Around 2.5%, with true inflation likely closer to 2%
Fed Funds Rate: Approximately 2.875%
Mortgage Rates: A low near 5.75%, with potential to reach 5.625%
Home Price Appreciation: Approximately 3% nationally

These figures represent national averages. Local market conditions — such as job growth, migration, and housing supply — will determine individual outcomes.

Final Thoughts: Strategy Matters More Than Timing

The outlook for 2026 suggests a market transitioning toward greater balance — one where opportunity exists, but smart planning matters more than speculation.

For buyers, lower rates may finally restore affordability.
For homeowners, refinancing opportunities could reemerge.
For long-term investors, steady appreciation continues to support real estate as a wealth-building tool.

a person giving a bundle of keys to another person

Understanding how the economy, Federal Reserve policy, mortgage rates, and housing supply interact allows you to make decisions with confidence — not emotion.

The most successful moves in real estate are rarely about reacting quickly. They’re about preparing thoughtfully and acting when the conditions align.

If you’d like help translating this outlook into a personalized strategy, a focused conversation can help clarify next steps — based on your goals, timeline, and financial picture.

Do reach out directly to me to begin crafting your plan!

As always, you can set up an appointment with me here…

Fannie Mae and Freddie Mac Reforms – A Podcast: Affordable Housing Ideas from Two Loan Originators

December 2, 2025 / Tom Bonetto

I recently sat down with Mike Nelson, a mortgage originator and host of the Mosaic Podcast.

We discussed some ideas that should be debated at the government levels regarding interest rates and home affordability.

I’d invite you to take a listen!

Here’s the link…

Specific Podcast Timestamps:

1:05 – Introduction
2:38 – Setting the Stage
5:02 – Ideas for Reform: Debt-to-Income and Residual Income
9:02 – The Importance of the Credit Score and Asset Utilization
12:12 – Over Regulation and Costs Associated with them
19:30 – Loan Level Price Adjustments Causing Rate Increases (2^nd homes/investment properties)
24:21 – 401(k) Utilization Without Penalty for Home Purchases/Gifts
25:28 – ‘Streamline’ Refinances for Conventional Borrowers
27:00 – Non-QM versus QM
29:00 – Government Debt and How It Impacts Mortgage Rates
32:19 – Is Real Estate Still a Good Investment?
33:55 – The Federal Reserve and The Data
37:00 – Final Thoughts

I hope you find it interesting, and feel free to reach out directly to me to discuss it further.

As always, you can set up an appointment with me here…

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Mortgage Rates Jump After the Fed’s Rate Cut — Here’s Why

November 3, 2025 / Tom Bonetto

If you’ve heard that the Fed cut interest rates and wondered why mortgage rates rose instead of fell, you’re not alone.

It’s one of the most common misunderstandings in the market—and last week’s Fed meeting was a perfect example of why that happens.

The Federal Reserve lowered its benchmark rate by 0.25%, and also announced the end of quantitative tightening (QT)—its long-running effort to reduce bond holdings.

Both moves were widely expected, and neither created a big market reaction on their own.

But when Fed Chair Jerome Powell spoke during his press conference, he made it clear that another rate cut in December was not guaranteed.

When asked about a rate cut in December, Powell stated “it’s not a foregone conclusion – far from it.”

That comment alone shifted market expectations, sending Treasury yields and mortgage rates higher within hours.

Why Mortgage Rates React Differently

Mortgage rates don’t move directly with the Fed’s rate changes. Instead, they follow the bond market, which constantly adjusts based on what investors expect the Fed will do next.

When Powell signaled uncertainty about future cuts, bond traders adjusted those expectations upward—pricing in fewer rate reductions ahead.

That caused bond prices to fall and yields (and mortgage rates) to rise.

In short:

The Fed’s current rate cut = already expected.
Powell’s tone about the future = what moved rates higher.

As a result, the average 30-year fixed rose back to levels last seen in mid-October, even though it remains lower than most of the past year.

What’s Next for Mortgage Rates

With the Fed now taking a more cautious approach, the market’s focus shifts back to the economic data that’s been delayed by the government shutdown.

Upcoming reports on jobs and inflation will likely set the tone for where rates go next.

If those reports show inflation cooling or job growth slowing, we could see another move lower in bond yields—and, eventually, mortgage rates. But until that happens, expect volatility to continue around Fed commentary and inflation data.

What This Means for Homebuyers

Even though rates ticked up after the Fed meeting, they’re still hovering near some of the lowest levels in the past year.

For buyers and homeowners considering refinancing, this period remains one of the most favorable we’ve seen since 2022.

Here’s what to do now:

Lock in a rate if you’re under contract or close to applying.
Stay informed—the next inflation report could open another window of opportunity.
Plan ahead—today’s movement shows how quickly markets react to Fed comments.

Reach out to me today to discuss your current situation and to make sure you are not missing out. I’d be happy work with you and explore options.

If it’s easier, you can schedule a call with me here…

Mortgage Rates Over the Past Three Weeks: What’s Changed

October 14, 2025 / Tom Bonetto

orange calculator beside the black smartphone

Over roughly the last three weeks, U.S. mortgage rates have edged downward, reaching their lowest levels in about a year.

According to Freddie Mac’s most recent data, the average 30-year fixed mortgage rate fell to 6.30 % from 6.34 %.

This decline is modest, but meaningful in the current interest rate environment — especially given how tightly rates have been trading lately.

In prior weeks, there was also a rebound in rates: for example, the week ending October 2 saw average rates rise from 6.30 % to 6.34 %, as Treasury yields ticked upward.

But the recent movement has tilted downward again, amid growing caution about economic strength.

Recent Months to Today

As of October 14, 2025, the average 30-year fixed mortgage rate stood at 6.30 % — down from 6.34 % the prior week.
Over the past several weeks, rates have settled in their lowest band in roughly a year.
Earlier in 2025, rates were higher — in many places above 6.8 % or even close to 7.0 % for conforming loans, depending on timing and market conditions.
Looking back further, we see that since 1971, the long-term average 30-year fixed rate is about 7.71 % (through 2025)
In other words, current rates are still below that historical average, though far from the ultra-low rates seen in the 2010s and early 2020s.

Why Rates Are Moving: Key Drivers

To understand why mortgage rates have shifted, it helps to zoom out and see the levers that push long-term borrowing costs:

1. Treasury yields & the bond market

Mortgage rates are closely linked to longer-term Treasury yields (especially the 10-year). When investors buy Treasurys, yields fall; when they sell, yields rise. Mortgage lenders price based on these benchmarks.

In recent weeks, Treasury yields have shown some softness, reflecting investor appetite for safer assets amid economic uncertainty. That downward pressure on yields helps bring mortgage rates lower.

2. Economic data & inflation

Every inflation report, employment release, and GDP update can swing expectations about future interest rates. If inflation shows signs of sticking higher, markets will demand higher yields (and mortgage rates) to compensate.

Conversely, weak jobs or growth data can boost expectations of rate cuts and push long yields lower.

In recent weeks, signs of softening in labor markets have grown more pronounced, which has helped ease rate pressures.

3. Federal Reserve policy expectations

The Fed doesn’t set mortgage rates directly—but its policy decisions and forward guidance are central to rate expectations. Markets are watching how many cuts the Fed will enact in 2025 (and how fast) and how strongly it will resist inflation.

Recently, the Fed has signaled caution, acknowledging that inflation risks remain. But weaker labor data may give it more room to ease.

4. Supply, demand & housing market sentiment

Mortgage rate movement also reacts to credit demand, lender competition, and overall confidence in the housing market. As rates dip, some borrowers respond quickly with refinance or purchase activity. That can feed back into pricing dynamics.

In fact, even small rate reductions lately have triggered increases in refinancing inquiries.

Also, broader uncertainties — such as the current U.S. government shutdown — create additional caution in markets, which can tilt toward lower yields (and lower mortgage rates).

What to Watch Next: Forward Outlook & Risks

Given where we are, here’s what I see as the main potential paths forward — and what borrowers should watch for.

Base Case: Modest Further Decline or Plateau

Most forecasts expect mortgage rates to stay where they are or possibly drift modestly lower through late 2025. For example, Fannie Mae recently revised its year-end expectation to 6.4 %, and 2026 to ~6.0 %.

Other analysts believe rates will more or less stay in the 6.2 %–6.6 % range through year-end, depending on economic data.
If inflation continues to ease and labor markets soften, bond yields could fall further, dragging mortgage rates down with them.

Upside Risk: Rates Could Rise

If inflation surprises to the upside, markets could push yields (and thus mortgage rates) higher.
Strong economic data — especially in jobs, consumer spending, or corporate profits — could make the Fed more reluctant to cut or even force it to reconsider policy tightening, which would ripple through longer-term yields.
Global or fiscal surprises (e.g. government shutdowns, debt ceiling worries, geopolitical events) can trigger volatility in bond markets, pushing rates upward.

Final Takeaways for Borrowers & Homebuyers

It’s not a dramatic rate cut that is in play — the recent moves are incremental. But every basis point matters when you’re financing a large amount.

If you’re in the market now and your numbers make sense, don’t wait on “perfect” rates. Locking something in is often better than trying to time the bottom.

Also, do keep a close eye on inflation numbers, payrolls/unemployment data, and Fed communications. These will be the levers moving rates in the coming weeks.

Finally, for clients who are refinancing or planning purchases in 2025, building in some “wiggle room” (i.e. rate buffers) is prudent given the potential volatility.

Reach out to me today to discuss your current situation and to make sure you are not missing out. I’d be happy work with you and explore options.

If it’s easier, you can schedule a call with me here…