---
title: 'Housing Market Has a New Problem: Surging Mortgage Rates'
source: 'https://youtube.com/watch?v=sqOFhUcE3w0'
video_id: 'sqOFhUcE3w0'
date: 2026-08-01
duration_sec: 651
---

# Housing Market Has a New Problem: Surging Mortgage Rates

> Source: [Housing Market Has a New Problem: Surging Mortgage Rates](https://youtube.com/watch?v=sqOFhUcE3w0)

## Summary

The video examines a sudden spike in US mortgage rates, which jumped from 6.36% to 6.75% in one week after spending months below 6%. It explains how mortgage rates track government debt yields, why oil and the petrodollar system are pushing those yields higher, and what this means for home prices, affordability and delinquencies.

### Key Points

- **Mortgage rates spike to 6.75%** [00:16] — The national average for a 30-year fixed mortgage rose from 6.36% to 6.75% in just a few days. Rates had been below 6% as recently as March, and the rapid rise undid months of progress in about two and a half months.
- **Mortgage rates track government debt yields** [01:26] — Mortgage interest rates are correlated with the interest rate on government debt. When Treasury yields go up, mortgage rates go up; when yields fall, mortgage rates tend to fall. The 10-year Treasury is the key benchmark shown in the video.
- **The petrodollar system explained** [02:48] — Oil trades globally in US dollars. Gulf countries sell oil for dollars and typically recycle a large portion of those dollars into US Treasuries, effectively lending money back to the US government in exchange for interest income.
- **Fewer oil dollars means less demand for Treasuries** [03:43] — When oil-producing countries export less, they earn fewer dollars, leaving them with fewer or no dollars to buy US Treasuries. Reduced demand for Treasuries pushes Treasury prices down and interest rates up.
- **Countries sell Treasuries to buy oil** [04:25] — Countries that need oil must obtain US dollars to buy it, so they sell their US Treasury holdings. This selling pressure also drives Treasury prices lower and yields higher.
- **Oil supply disruptions lift inflation expectations** [04:53] — Disruptions such as the Strait of Hormuz threaten energy supply and raise expected prices. Higher inflation expectations make bond investors demand higher interest rates to protect purchasing power, repricing government debt upward.
- **Consequences for housing** [06:03] — Higher mortgage rates further reduce affordability, slow sales, reduce the pool of qualified buyers, increase mortgage delinquencies and put downward pressure on home prices. But downward pressure does not necessarily mean a crash.
- **Home prices are still rising** [07:24] — In April, US home prices rose 0.2% month-over-month and 2.1% year-over-year. The video stresses that national prices are not crashing and remain expensive.
- **Delinquencies rise from a low base** [09:03] — Mortgage delinquencies are increasing as expected, but they are starting from a much smaller base than before the 2008 housing crash. The data does not yet justify panic, although prolonged growth in delinquencies would be more alarming.
- **Outlook for mortgage rates** [09:58] — The path forward depends on the war in the Middle East, petrodollar stability and inflation expectations. The Fed could buy Treasuries to bring rates down, but that risks fueling inflation and pushing home prices higher.

### Conclusion

The surge in mortgage rates is real and tied to global oil and Treasury dynamics, but it is a headwind rather than a crash catalyst for the housing market. Home prices are still climbing, and the future hinges on geopolitical de-escalation and Fed policy.

## Transcript

housing markets. Mortgage interest rates have been shooting up. So, why is this happening? What are the consequences on the housing markets? And when will Now, I want to show you this on the chart how rapidly mortgage interest
average interest rate on the 30-year fixed for the past 12 months. And it's plotted and updated on a weekly basis. So, listen, what you see here is the tail end of last week where the national average was at 6.36%
for a 30-year fixed mortgage. But, right now, over the past few days, it's now risen to 6.75%. So, again, this is where we were last week. But, if we extend the graph ourselves, and this graph is coming
straight from the Federal Reserve's websites, so then this is what we're going to see when they update it, spiking it to this level in just 1 week's time. Now, I just want you to take into consideration that we were
take into consideration that we were below 6% in March. So, that rise to 6.75% was rapid. So, that's not normal for mortgage interest rates. that we made bringing down mortgage
interest rates over the past year to see it all undone in about 2 and 1/2 months' So, it was a grind. I mean, just take a look at the chart. It was a grind bringing it down below 6% and then boom, all of a sudden that progress was just
gone and just undone. Okay, now, I want to show you why mortgage interest rates have been shooting up higher. And to begin, you important. So, mortgage interest rates are
correlated to the interest rate on government debt. So, that means that if interest rates on government debts goes up, then interest rates on mortgages are as well. If interest rates on government debts goes down, then mortgage interest
rates are going to go down as well. So, they're correlated. Okay, so, to see the correlation if you look at the gold line, that's the average interest rates on mortgages. And you can see the interest rate, like how
graph. And the lighter bluish line is the interest rate on the 10-year Treasury notes. And you can see the interest rate exactly how much it is. So this is basically what it costs the
US government, the federal government to borrow money for a 10-year duration. So anyways, as you can see, they're correlated. And listen, I just want you yield that's been spiking up. It's the 30-year yield that's been spiking up as
Okay, so why are interest rates on government debt shooting up and consequently causing mortgage interest rates to shoot up as well? reasons, but I want to give you the main ones. So first,
I want to explain to you the system that we currently live in. So it's called the petrodollar system. So the deal is that oil trades globally So the deal is that oil trades globally for the majority of trade in US dollars.
Gulf selling their oil in dollars, and which Okay, so they they sell their oil, they receive the dollars, but now what do received? Okay, so generally this is what happens.
They take their dollars, at least a sizeable chunk of it, and they buy US Treasuries with those dollars. So essentially, they take their dollars, they lend it back to the US government, and the US government pays those Gulf
and the US government pays those Gulf countries interest income. Okay, but now depending on what country that you're talking about, less or none of that oil that they're producing over there is getting exported out.
have those Gulf countries, they have less or fewer dollars that they're receiving, right? Which means that they have fewer or no dollars to buy US Treasuries, which means that interest rates on US
know what? If you want me to explain to you as simply as possible, their oil that they're producing, it's not getting out, so they're not making money. And if they're not making money in US dollars, then well, they have no money to lend to
the US government to buy US Treasuries. That's simply what's happening. And then you have the situation where other countries need oil. And in order to buy oil in US dollars, they need dollars, right?
So, what do they do? They sell their Treasuries to receive dollars in order to buy oil. Okay, but when they sell their government bonds, you know, US Treasuries to fall. And interest rates
Treasuries are going to increase. So, that's why we're seeing interest rates And another reason why interest rates are going up is because the supply of oil has been disrupted, right? The Strait of Hormuz.
the price of almost everything's going major input cost for just about everything, right? So, if the supply of energy is disrupted and prices are expected to go up, then
up as well. And if inflation expectations increase, then bond investors are going to want to be compensated at higher interest rates for lending money to the US government. So, that makes sense, right?
with lending money to the US government for an interest rate of, let's just say But now, with all this going on, you think that the rate of inflation's going to be running at 5%.
to lend money to the US government for 4% because if you think that inflation's going to be 5%, then you don't want to be compensated 4%, otherwise you're going to be underperforming inflation and you're
real purchasing power. higher than the rate of inflation in order for you to truly come out ahead, right? So, inflation expectations are going up.
Therefore, interest rates on government debts are repricing. Okay, so I just told you what is happening. Mortgage interest rates are going up and I just explained why it's happening. It's because interest rates on government
debts is going up and those two are correlated. And I just drilled down into why that's happening, why interest rates on government debts is going up. Okay, now I want you to know the consequences of higher mortgage interest
rates in the housing markets. So, here are the biggest points that I want you Higher mortgage interest rates will further reduce affordability, of course. It's going to slow down sales. It's going to lead to fewer buyers as fewer
buyers will be qualified. It's going to cause increased And this is going to be a headwinds for home prices. doesn't necessarily mean that home prices are going to go down. It just
if home prices are still going up, like if they're still on an upward they're just not going to go up as high as they would have with lower interest And if home prices are going down, you know, if they're on a downward
trajectory, then they're going to go down more than they would compared to if interest rates. higher mortgage interest rates will put downward pressure on home prices, but
it's not going to collapse the housing market in terms of price. now, and the most recent housing market data out there is currently April. For the month of April, home prices in the US nationally rose by
0.2% month-over-month. And home prices rose by 2.1% year over year. So, home prices are not crashing. As a matter of fact, they're still going up. I mean, I don't think that you can deny that home prices are still expensive.
You know, home prices have not crashed nationally to a point where people are know, so affordable right now. Homes are so cheap right now." You know, I I haven't been hearing that. And I just want to give you some context
average interest rate on a 30-year fixed mortgage. And this is kind of from the Federal Reserve. So, we're currently at 6.75% right now. years. Yes, 6.75% is high, relatively speaking.
You know, there's no doubt about that. Especially compared to the 3% or sub-3% that many people still have right now on their mortgage. However, we've been here at 6.75% before. And it was not enough to crash
the housing market. I mean, we even got closer to 8% back in So, I'm sure that it slowed down the market. But as you know, it didn't crash So again, this is definitely going to be a headwind for us in terms of home
a headwind for us in terms of home prices. But leading to a crash just on that's a stretch. And another thing that I want to address is that we just got word a few days ago that mortgage delinquencies are
this was expected. We actually covered this thoroughly in previous videos. But I just want to give you a high-level summary. Yes, higher mortgage interest new borrowers to keep up with their payments, right?
foreclosure activity, we're starting from a much smaller base compared to the previous housing market crash. So yes, although delinquencies are increasing, it's off a much lower starting points. So therefore, at this
like if you look at the data, I don't see the need to panic. So, if it's going to if the delinquency rates is going to keep on growing and increasing for another, you know, 2 3 years, then yeah,
then it's going to be a a cause for a bigger alarm, but I just don't see it at this point in time. Now, in terms of when mortgage interest rates in terms of when mortgage interest rates will come down, my honest answer is that
You know, if there's going to be de-escalation, if there's going to be escalation, or if this is just going to drag out. It's the war that's of course driven it up, mortgage interest rates. If the war
continues, if there's more trouble with the petrodollar, if there's liquidity expectations then yes, mortgage interest rates are going to go even higher than where we're currently at. If the war de-escalates,
then mortgage interest rates, you know, you can expect them to come down. If the Federal Reserve gets involved they can actually buy Treasury notes and Treasury bonds and bring down mortgage interest rates. However, if they do
inflation and that's going to cause home prices to go up. Anyways, that's all for today. I hope that helps. Please subscribe. Thank you for the support and I wish you a very nice day. Take care.