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Mortgage Rates Are What They Are

Interest rates, including mortgage rates, are certainly higher than where they were six years ago, and even a year ago. Fortunately, Orion and our AEs focus on other things in the mortgage process, and not things like rates that we can’t control. But it is helpful for our brokers to be able to explain to clients why rates are as high as they are and not expected to come down any time soon.

Borrowing costs in some of the world’s largest economies are at their highest levels in decades. The moves threaten to ripple through a wide range of debt, including business loans and mortgages for already-stretched consumers. A combination of factors are prompting investors to demand higher returns to hold government debt: a flood of borrowing by the world’s richest nations, expanding budget deficits, persistent inflation primarily due to the war with Iran, and few signs that countries are able or willing to take steps to improve the seconditions.

The yield on 10-year U.S. Treasury notes, perhaps the world’s most influential interest rate, reached its highest since January 2025, briefly hitting 4.8 percent, and the yield on the 30-year bond continued to hover around a two-decade high. Yields move inversely to prices, so the rise in yields reflects a drop in prices. Mortgage rates tend to track 5- or 7-yearmaturity Treasury securities, but they all generally move together.

America’s rising borrowing costs have set off a battle between Treasury Secretary Scott Bessent and investors. Technology companies are borrowing billions to build artificial intelligence systems, thus swamping markets, and pulling investors away from government debt.

One of the most pressing and unpredictable drivers of bond market turmoil is the protracted war in Iran. As the United States and Iran renewed attacks recently, the price of oil and natural gas began to climb again. Brent crude, the international oil benchmark, is approaching $100 a barrel, about 35 percent higher than prewar levels. The prices of refined fuels like gasoline and diesel have risen even faster, increasing expectations of higher inflation that could prompt central banks to raise short-term interest rates.

Lastly, U.S. government debt levels, also known as the gross national debt, topped $40 trillion for the first time, more than 120 percent of the size of our economy. Unfortunately, many politicians don’t appear worried enough about these debt levels and continue to make plans that are not likely to shrink budget deficits.

And so, with expectations of more borrowing to come, investors aredemanding higher returns to hold government bonds. Fortunately, Orion’sproducts, service, and especially technology are critical to our client’ssuccess, regardless of the interest rate climate.

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