NEW YORK, July 29, 2026 — US mortgage rates moved higher on Wednesday after the Federal Reserve decided to maintain its current policy stance, with long-dated Treasury yields also climbing. The 30-year fixed mortgage rate rose by two basis points to 6.78%, according to Mortgage News Daily. Concurrently, the yield on the 10-year Treasury note increased by six basis points, while the 30-year bond yield surged by 11 basis points.
The rise in mortgage rates was attributed primarily to higher long-term Treasury yields rather than changes in the Fed's overnight borrowing costs. The spread between mortgage rates and 10-year Treasuries tightened by approximately four basis points to 211 basis points, suggesting that the upward pressure on mortgage rates stemmed from the broader bond market rather than from factors specific to the mortgage industry. This distinction is crucial for investors involved in housing and mortgage credit, as it indicates that the benchmark shift is the primary driver.
The Federal Reserve left its target range for the federal funds rate unchanged at 3.50% to 3.75%. The decision was not unanimous, with a 9-3 vote split. Three regional presidents supported a quarter-point hike. In his statement, Chair Kevin Warsh emphasized the Fed's commitment to fighting inflation, stating, "This Fed will not waver." He also noted that both nominal and real Treasury yields are materially higher, reflecting persistent inflationary pressures.
The yield curve steepened as long-term yields rose more than short-term yields, a scenario that tends to be more challenging for mortgage borrowers. The 2-year Treasury yield actually declined by four basis points to 4.22%, while the 30-year yield jumped to 5.20%. This divergence underscores the market's expectation that the Fed may need to maintain a restrictive policy for an extended period.
Demand in the housing market had already softened prior to the Fed's decision. The Mortgage Bankers Association reported that the contract rate increased by seven basis points to 6.76% in the previous week. Overall mortgage applications decreased by 6.4%, with refinance activity plummeting by 9.9% and purchase applications also declining. MBA deputy chief economist Joel Kan attributed these trends to "ongoing affordability challenges" stemming from higher rates.
Some mortgage analysts had anticipated a modest short-term drop in rates ahead of the Fed meeting, as lenders had already priced in some risk of an increase. However, the market's reaction after the decision moved in the opposite direction, with rates climbing. The CME Group's FedWatch tool indicated a 57% probability of a rate hike in September, following the central bank's decision to hold steady.
Nationwide's chief economist, Kathy Bostjancic, described the three dissenting votes as "increasingly more hawkish," though she maintained her view that rates should remain steady for the remainder of the year. Looking ahead, key economic data releases, including June inflation figures and the preliminary estimate for second-quarter GDP on Thursday, as well as the July employment report on August 7, could swiftly impact long-term yields and mortgage rates.
Risks to the outlook include a potential pullback in inflation or growth numbers, which could reverse Wednesday's selloff in long-dated yields. Conversely, stronger data or renewed energy price pressures could drive mortgage rates up to 7%. These are possible scenarios, not predictions, but the message is clear: the Fed's decision to hold rates steady has not alleviated pressure on housing finance. Easing for mortgages now increasingly depends on a decline in long-term Treasury yields.
