US Mortgage Rates Rise as Tech Stocks Recover

US mortgage rates moved higher on Tuesday, October 20, as renewed confidence in technology stocks reduced some of the recent demand for government bonds. The increase followed a volatile week in which concerns about artificial intelligence investment returns pushed investors toward safer assets, driving Treasury yields lower and easing mortgage borrowing costs.

According to NerdWallet, the average annual percentage rate (APR) for a 30-year fixed mortgage reached 7.23% on Tuesday, based on rate data provided by Zillow. That was 3 basis points above Monday's level but 7 basis points below the rate a week earlier.

Mortgage News Daily reported a higher average rate of 7.43% for top-tier 30-year fixed mortgages at the start of the week. Its figure was 6 basis points above Friday's level and 10 basis points above Thursday's low of 7.33%. The difference between the reported averages reflects the publications' respective rate data and methodologies.

The recent fluctuations followed stronger-than-expected US inflation readings for September. According to the inflation figures cited by MoveSmartly, the Consumer Price Index rose 3.7% year over year and 0.6% month over month. Core CPI, which excludes food and energy, increased 2.6% annually and 0.3% monthly.

Initially, the inflation data pushed bond yields higher and strengthened expectations of another 0.25-percentage-point Federal Reserve rate increase. However, a subsequent sell-off in technology stocks changed investor behavior, increasing demand for Treasuries and reversing much of the initial rise in yields.

MoveSmartly reported that the benchmark 10-year US Treasury yield subsequently fell by approximately 0.20 percentage points in a single day. Expectations for the next Federal Reserve rate increase also shifted toward December rather than the upcoming October 28 meeting.

The change in market expectations came as Federal Reserve officials signaled that policymakers could take a measured approach to further tightening. San Francisco Fed President Mary Daly said additional tightening would probably be necessary but was not urgent, while New York Fed President John Williams had previously indicated that the central bank could afford to be patient.

At an International Monetary Fund event in Bangkok on Friday, Fed Chair Kevin Warsh indicated that recent economic developments were broadly consistent with the central bank's outlook when it raised rates in September. Investors interpreted his remarks as a sign that the latest inflation figures had not substantially increased the urgency for another increase.

Technology companies' financing needs have also contributed to pressure on the bond market. According to NerdWallet, major technology firms issued substantial amounts of corporate debt to finance artificial intelligence infrastructure, giving investors alternatives to Treasury securities during the summer and early fall.

When investors sell existing bonds, their prices fall and their yields rise because the underlying payments remain fixed. Mortgage rates generally move in the same direction as longer-term Treasury yields, although lenders also account for other market conditions and risk premiums.

Concerns about the profitability of artificial intelligence investments recently encouraged investors to reconsider technology stocks and increase their holdings of Treasuries. The resulting bond-price gains helped lower yields and mortgage rates, but Tuesday's increase suggested that the reversal had not established a sustained downward trend.

MoveSmartly also noted that elevated energy prices could keep inflationary pressure alive, while prolonged US-Canada trade tensions could weaken economic activity and increase disinflationary risks. Those competing forces have contributed to uncertainty over the future path of interest rates.

In Canada, government bond yields finished the previous week near their starting levels after following a similar rise-and-fall pattern in US Treasuries. MoveSmartly reported that lenders had raised fixed mortgage rates several times in recent weeks and did not expect an immediate decline solely because bond yields had retreated amid financial-market concerns.

The US inflation figures and shifting investor expectations remain central to the mortgage-rate outlook. With technology shares recovering and bond markets responding to competing inflation and economic-growth risks, the latest increase has yet to establish whether borrowing costs will resume their earlier upward trend.