US mortgage rates fell to a seven-week low, just before bond yields jumped

What happened

The average rate on a 30-year fixed US mortgage fell to 7.11% in the week to 12 November, from 7.18% a week earlier, according to Freddie Mac's weekly survey. It was the fourth weekly fall in a row and, as Freddie Mac's chief economist Sam Khater put it, the lowest level in seven weeks. The 15-year rate fell to 6.45% from 6.57%. A year ago the two rates were 6.24% and 5.49%.

Why the bond market matters

US mortgage lenders price 30-year loans off the 10-year Treasury yield, adding a spread to cover their costs and risks. When the 10-year falls, mortgage rates tend to follow, and vice versa. That is why the mortgage rate eased through late October and early November, as Treasury yields came off their highs during the rush into safe bonds.

Then, on 10 November, a hotter-than-expected inflation report sent the 10-year yield up about 13 basis points to 4.99% (our story). Whether that feeds through to mortgages will show in the next weekly surveys. Our mechanic how a rate rise reaches your wallet explains the chain from bond markets to home loans.

What a point costs

On a $400,000, 30-year loan, the monthly payment is about $2,690 at 7.11% and about $2,460 at 6.24%: roughly $230 more. A full percentage point higher adds about $275 a month at these rates. Those differences, multiplied across millions of buyers, are how higher rates cool the housing market.

Where it sits in the chain

This is Link 2, bonds, reaching Link 1's real-world end: what happens in the Treasury market decides what home buyers pay.

What to watch

• Next week's Freddie Mac survey.
• The 10-year Treasury yield around 5%.
• The Fed's 8–9 December decision.