Strong jobs data, inflation concerns keep mortgage rates elevated

Mortgage rates continue to stay above 6.7%, but housing demand remains positive, with growth in weekly pending sales, new listings and active inventory combatting a high rate cycle.

At HousingWire’s Mortgage Rates Center on Tuesday, 30-year conforming loan rates averaged 6.78%, while rates for 30-year jumbo loans averaged 6.77% and rates for 30-year loans backed by the Federal Housing Administration (FHA) were at 6.33% — all increases from data one week ago.

HousingWire lead analyst Logan Mohtashami recently noted that weekly pending home sales continue to post year-over-year gains, while active inventory and new listings have increased, suggesting that buyers are continuing to engage with the market despite elevated borrowing costs.

In an analysis published June 6, Mohtashami attributed the recent rise in mortgage rates largely to higher bond yields rather than weakness in housing fundamentals, arguing that demand has held up better than many analysts anticipated.

Analysts like Mohtashami are paying attention to what the Federal Reserve will do and the ongoing conflict in the Middle East.

“Mortgage rates are near yearly highs because the conflict is still going on, and the Fed is talking about rate hikes instead of cuts now. With that said, we still haven’t gone above my yearly peak forecast in rates, but that is in jeopardy if this conflict lasts until the end of summer,” Mohtashami said.

Kyle Bass, production business manager at Refi.com — an affiliate of Veterans United Home Loans — pointed out that while Freddie Mac reported a slight decrease in rates last Thursday, refinance activity remains “repressed.”

“Recent application trends show many homeowners choosing to remain on the sidelines as they wait for a more meaningful decline in borrowing costs,” Bass said. “As a result, today’s refinance market is increasingly driven by borrowers with specific financial goals rather than those simply seeking a lower interest rate.”

However, Bass said that borrowers who have improved their credit scores, reduced other debts or accumulated substantial home equity “may find opportunities that make financial sense” regardless of where mortgage rates are today.

What it means for refis

Optimal Blue’s May 2026 Market Advantage report, released today, also saw refinance activity drop. The refinance share declined to 19% of total lock volume in May, its lowest level since June 2025. As a result, the company observed that borrowers are turning to adjustable-rate mortgages (ARMs), which accounted for 11% of total production in May, the highest level since October 2022 outside of March 2026.

Mike Vough, senior vice president of corporate strategy at Optimal Blue, said pull-through rates, which measure the percentage of locked loans that ultimately close, declined for both purchase and refinance loans as borrowers reacted to changing rate conditions.

“Instead of waiting on the sidelines, [buyers] are doing things like pursuing rate buydowns, ARMs, and buying now with the intention of refinancing later,” said John Donikian, vice president at Best Interest Financial. “The market is also now adversely selecting borrowers.”

He continued, “Mortgage rates aren’t high because of a weak housing market. They’re remaining elevated because of inflation and widespread economic uncertainty pushing bond yields. Until investors believe inflation is fully controlled, many prospective homebuyers will see elevated mortgage rates as the new norm.

Inflation, jobs data shape rate outlook

Other mortgage professionals point to broader bond-market dynamics as a key driver of borrowing costs. Cody Schuiteboer, president and CEO of Best Interest Financial and Donikian’s colleague, noted that the spread between mortgage rates and Treasury yields remains wider than historical norms, reflecting investors’ continued caution toward mortgage-backed securities.

“There are three main factors that keep rates high. The Treasury Department needs to sell lots of bonds due to the growing budget deficit. Increased supply means investors need higher returns on their investment, which results in increased rates for mortgages,” Schuiteboer said. “Inflation, [ too]. Prices are stubborn and haven’t stopped growing, which means the markets are preparing for potential future hikes and/or rate cuts from the Fed.”

Schuiteboer added that he’s watching the ongoing geopolitical uncertainty and rising oil prices.

Steven Parangi, a loan officer and owner of Alpine Mortgage Services, said stronger-than-expected employment data and persistent inflation pressures have contributed to the recent rise in mortgage rates. Data released last week by the U.S. Bureau of Labor Statistics found that 172,000 total nonfarm payroll jobs were added, and April’s job numbers were revised upward from 115,000 jobs to 179,000 jobs added.

Mike Fratantoni, the senior vice president and chief economist of the Mortgage Bankers Association, said last week that the job market is showing “surprising resilience” but that overall inflation is too high.

“MBA continues to anticipate that the Federal Reserve’s next move will be a rate hike, and that means mortgage rates are unlikely to drop anytime soon,” Fratantoni added.

Parangi shares this sentiment.

“When inflation is reaccelerating at the same time employment is holding firm, it becomes very difficult for the Fed to justify cutting rates,” he said. “Until investors see evidence of softer inflation and a weaker economy, mortgage rates will have a hard time moving much lower.”

Affordability challenges

Parangi added that although mortgage rates remain near historical norms, affordability challenges are being amplified by home prices that have risen sharply since 2020, making today’s borrowing costs more difficult for prospective buyers to absorb.

“While today’s rates are not unusually high from a historical perspective, what makes them feel so high is the combination of today’s rate with today’s home prices. Home prices moved up dramatically over the past few years and wages have not kept up in many markets. A 6.5% mortgage rate on a home price that already rose 40%, 50% or more since 2020 is significantly different than the same rate ten years ago,” he said.

Melissa Cohn, regional vice president of William Raveis Mortgage, said that market sentiment has shifted from hopes for a rate cut to “fears of a rate hike” by the Fed this year.

“Mortgage rates are hovering at 9-month highs due to war-driven energy shocks, persistent inflationary fears and a stronger-than-expected employment sector,” she said. “All of these factors are keeping mortgage rates higher than we had hoped for this year.”