You Won’t Believe Why Mortgage Rates Are Going Up (Again)

0:00Mortgage rates just climbed back over 6.7%. And while we're all used to a lot of volatility in the mortgage market these days, here's the part that should get your attention. It happened on the same day we got an inflation report that looked, at least on the surface, like good news. And that disconnect tells you almost everything about the market we're in right now. Nothing is exactly straightforward these days, and you need to go a level deeper to understand what's going on and where the market is heading, which is exactly what we're doing here on On The Market today. We're covering a lot of economic news that came out this week, from inflation reports and the surprising direction of mortgage rates, to the housing bill that finally got enacted into law, and some fresh trouble in the credit markets that you should be paying attention to.

0:53We've got three big stories and one big theme. The stuff that's moving your deals and shaping the investing climate right now is actually happening away from the housing market, not in it. This is On The Market. Let's get to it.

1:11Hey, everyone. Welcome to On The Market. I'm Dave Meyer, Chief Investment Officer at BiggerPockets. I'm also a housing and economic analyst and real estate investor. Today's episode, we're going to be going through news, as we often do, because there is a lot to cover. A lot tends to happen mid-month with economic news, and that's what we're seeing here in July of 2026. The June inflation report just dropped, and there's just enough going on that I want to break down a couple of stories that you may not have seen because they're not directly happening in the housing market day-to-day right now.

1:45But it's still impacting rates, what's going on with your portfolio, and the American consumer. So we're going to go over all those stories. And as always, I'm going to tell you what each story means for you as an investor and what you should be thinking about with your own businesses. Let's get to it. First up, why are rates going back up? Why are mortgage rates back at 6.75? Thought we were doing a little bit better. And we were. Just for some context, back in February before the war in Iran started, rates were at about 6%. That was great. Then when the war started and fear was super high, we had rates climb up to where they were today, but they had been gradually easing and getting a little bit better.

2:25We were seeing them closer to 6.5%, but now they're back up again. Now, the weird thing about this that might not make so much sense, at least on the surface, is that inflation has actually improved a little bit. Just today, I'm recording this on July 14th, Just today, the CPI, the Consumer Price Index, which measures inflation across the economy, came out and it was better than it's been in several months. It was actually down 0.4 percent month over month. The annual rate, which is what we usually talk about, fell from 4.2 percent to just 3.5 percent. That's still elevated. It's well above the Fed's target of 2 percent, but it is moving in the right direction.

3:10And a lot of that, a lot of the relief came from gas prices, as you can imagine, right? We, up until a couple days ago, had a ceasefire with Iran. Oil prices were falling down. They weren't back to where they were before the war, but they were much, much better. We saw gasoline prices. The prices you're paying at the pump fall about 10 % in June. And so that really brought down the CPI. But the good news is that the core CPI, we talk about this a lot, but the core CPI is another thing that economists track. It removes food and energy from the total equation because those things are really volatile.

3:48And the core CPI was flat month over month. That's good. And it fell annualized to 2.6 percent. Both good things, right? So even if you don't factor in gas and oil and all that, we still got a better inflation reading. So the question you should be asking yourself is why are mortgage rates going back up? What we always talk about on the show is that mortgage rates are very tied to 10-year treasuries and the spread, right? Those are the two things that we always talk about. That is what impacts mortgage rates. But one of the major drivers of yields is inflation. And a lot of people have said if inflation gets better, mortgage rates will come down.

4:29Now, I did a whole show on this recently and said, I don't think they will come down quickly. but I did say that if inflation gets better, rates will probably not go up. So what happened here, right? Why are mortgages going up? Well, there are two reasons. One, I think is kind of obvious. And the other one, no one seems to be talking about, but we're going to get into it today. The first reason is that even though inflation has gotten better, that report is backward looking. We're midway through July and we got an inflation report today for June. What's happening right now is signaling that we're not out of the woods on inflation.

5:07So, yes, we got one good print, but that does not mean inflation has gotten better. And just over the last couple of days, the war and conflict in Iran is flaring up again. The ceasefire that we had for a couple of weeks, President Trump declared it over last week. There are fresh airstrikes going on. The Revolutionary Guard is attacking boats going through the Strait of Hormuz. The Strait of Hormuz is definitely not open. We're seeing tanker traffic decline again. And oil prices just yesterday went up 10 % in one single day. So we are clearly seeing an environment where we got one good month amidst an environment of high inflationary pressure.

5:54And clearly right now, what's going on in the markets, especially with oil stocks, the bond market, is that traders, people who influence this stuff, who have lots of money like pension funds and hedge funds and sovereign wealth funds, they don't think the straight is opening. Right. Like if you look at the situation, I kind of agree. It's really hard to imagine how this gets better. Like I know we just had a tentative ceasefire in place, but that fell apart pretty quickly. And it seems like both sides are digging in even more. It doesn't seem like we're moving towards an agreement anytime soon.

6:31Even the other day, the Trump administration came out and said that the prospects of a nuclear deal is looking less and less likely. And so if you look at this big picture, the inflationary pressure we had in March and April and May that eased in June is probably coming back. If we look forward to what we're going to see in the July inflation data next month, it's probably going to look worse. And the bond market doesn't wait. It does not wait for that inflation print. They could read the tea leaves. The inflation fear is back, even though it came on the day, even though all this stuff is happening the day we got a good inflation print.

7:08Inflation fear is worse right now, even after that print. And that is the number one reason we are seeing mortgage rates go up. By the way, don't expect the Fed to come in and rescue things, right? Because they are seeing the same thing. Even though we had a good inflation print just this week, we saw Kevin Warsh, the new chair of the Federal Reserve, said that the Fed has zero tolerance for inflation. And so even though they got one good print, they also see what's going on here and that the underlying inflationary pressure that we have in the economy has not gone away. Some would argue it's getting worse.

7:45We have to see. We don't really know if it's getting worse, but the pressure has not gone away. And so most people still think that a rate hike is on the table and is more likely than a rate cut. So the inflation picture is keeping those rates up despite the good print we got today. Now, that should kind of make sense. If you listen to this show, we talk about this stuff a lot. The second reason is one that people are not talking about is not really directly related to inflation or isn't even connected to the housing market. It actually has to do with AI. I know everyone's talking about AI. You can't go through a conversation without AI right now, but this is really true.

8:26AI is pushing up mortgage rates and maybe not in a way that you have noticed before. But all of these companies that are building these massive data centers, they are spending hundreds of billions of dollars per year on data centers. The way that they are raising money for that, some of them are just using cash that they have, But many of them are raising money. They're going out and finding investors to help them invest and build all this infrastructure. And the way that they do that, some is through stock issuance. But the other way is through bond issuance. Basically, they put out corporate bonds.

9:03It's similar to what the U.S. does, right? We talk all the time on the show about treasuries. That's a U.S. government bond where the government raises money. They borrow money from investors and pay them back, you know, four and a half percent. That's the yield on a 10-year US treasury right now. Companies can do the same thing. They can issue bonds and basically take out a loan from investors and pay them back over time. And this happens all the time. There are always corporate bonds. But the scale of how much AI companies are raising through bonds is not really something that we've seen before.

9:38In the first half of the year, in 2026, the first half of the year alone, these six hyperscalers, These are companies like Microsoft and OpenAI and Anthropic and these big companies that are investing heavily, heavily, heavily into data centers. They raised$244 billion alone, six companies in half a year, a quarter of a trillion dollars. That actually takes AI companies from 1 % of investment grade bonds, corporate bonds, to roughly 18%. That is a massive increase. In one month, July alone, Amazon put out$25 billion in bonds. And I know with these companies, billions, hundreds of billions, trillions, the numbers start to sound benign.

10:28But these are huge, huge numbers, right? And it matters. And the reason it matters, the reason you should care about this is because all of this borrowing, it competes with US treasuries, right? There is a limited pool of capital that people are willing to lend in the form of bonds. And yes, the U.S. government is considered the safest bond. It is where most of the money in the world goes to in terms of bonds. But corporate debt tends to pay a higher yield. It's a little bit riskier than the U.S. government. It is much riskier than the U.S. government, so it pays a higher yield. And right now, investor appetite for that risk and for those higher yields is high.

11:09People want it. People are absorbing it. Just in July alone through July 8th, in eight days, the bond market took down$32 billion of new AI bonds. And the way that this impacts mortgage rates, the mechanism, is that when people are putting their money, when these big institutions are putting their money into AI bonds and debt, instead of U.S. government debt, that means there's lower demand for U.S. government debt, right? Lower demand for treasuries. When there is lower demand for treasuries, the yields go up because the government has to pay a higher interest rate to compete against these AI bonds.

11:47And as we've talked about, that yield on U.S. treasuries is vitally important to mortgage rates. It is one of two variables. It's the 10-year U.S. treasury, and it's the spread on treasuries. And right now, although it's not completely changing the mortgage market, it is putting upward pressure on mortgage rates. And so that is why if you combine these two things, both the war in Iran, spiking again, and all of this insatiable need for money to go into the AI infrastructure building, which I have a lot of questions about, but that's a topic for another episode. Those two things combined are pushing up mortgage rates.

12:26And unfortunately for us in the housing market, it's probably going to stay like this for a while. That's why I've said mortgage rates are not going down. I did not expect them to go back up to six and a quarter, but I've said they were going to remain in the mid sixes. And that is generally correct. Hopefully they don't go up anymore, but we're just going to have to wait and see. And this is going to weigh on the housing market, right? Luckily, mortgage rates were about this high last year, right? So this isn't unprecedented. And it's not like we're in some crazy era where people in the last few years haven't seen mortgage rates this high.

13:00They definitely have. and people are just adjusting to it, which is good. But if you were hoping for some mortgage late relief, this is just another step back. Kind of feels like we take one step forward, two steps back. And today it kind of feels like that, right? We had a good inflation print, but the inflationary pressure is getting worse again. And this AI competition is a new variable that is impacting mortgage rates. And so this is what we're gonna have for the foreseeable future. We're still in the great stall. Nothing really changes about that. But I do hear a lot of people on social media, in the media, saying mortgage rates are going to get better.

13:35I wouldn't count on it. Maybe they'll come back down a little bit. But, you know, we're not getting to low sixes anytime soon, in my opinion. Maybe even not by the end of the year. So buckle in for this. It doesn't mean the market's going to collapse. Like, we're seeing higher demand. Just remember that. Like, people are still buying homes more than they were last year. It's not great. It's still a slow, sluggish market. So for right now, it's probably not going to change things fundamentally. fundamentally for the worst. But if affordability does continue to erode, either from mortgage rates, prices going higher, wages going down, unemployment going up, that will impact the housing market.

14:07But that's not happening right now. So right now, what you need to know, rates are up and they're probably staying relatively high for the foreseeable future. Not the best news, but stuff you need to know. So let's move on. We have two more stories about the new housing bill that did get enacted into law and some stress in the credit market you should be paying attention to. Got to take a quick break though. We'll be right back. Some listeners may wonder why their insurance quote only took 30 seconds. Some listeners may wonder why their insurance quote took 30 seconds. A better question is how long will that policy actually hold up when you need it?

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16:51Welcome back to On the Market. I'm Dave Meyer. Today, going over a lot of economic news. We are getting in mid-July. Our second story here today is about the new housing bill, the 21st Century Road to Housing Act. It actually took effect this past Saturday. There was a lot of drama about this. It passed both chambers of Congress a couple weeks ago. President Trump refused to sign it. But there's actually this parliamentary rule where if the Senate sends over their finished bill to the president and the president doesn't do anything for 10 days, it actually just goes into the law. And President Trump didn't do anything.

17:28He didn't officially veto it. He just didn't sign it because he was hoping to attach this to a voter registration bill that he's been pushing for. But instead of vetoing it, he just sort of did nothing. And we got the Road to Housing Act, one of the first big bipartisan bills I can remember in recent history. And I've talked about this a lot. You can go back and check out other episodes where I go into a lot of the provisions and details. There are dozens of them. There's a lot in there. But big picture, I'm a fan of the bill. It's not a silver bullet. I think it does good stuff. I think the spirit of the bill is what I like about it is because instead of just trying to stimulate demand by offering down payment assistance or trying to lower mortgage rates somehow through portable mortgages or 50 year mortgages or stuff that, you know, I am not a fan of.

18:16It targets the main issue, which is supply side. There are some demand side things in there, and I'm not against demand side solutions. I think there can be a bandaid for the low affordability that we have. But to fix the long term stuff, which is what we should all be hoping for, you need to go after the supply side. And I like that this bill targets it. It's not going to fix everything overnight. It's at a federal level, which is a problem in itself because most housing policy happens at a state and local level. And although this bill does encourage local governments to be better about allowing development and revitalizing housing, they don't have to do it.

18:56There's no requirement in there. But today, I want to talk about one part of the bill because this is making a lot of news. It's making all the headlines. Been on a couple of news programs recently, and it's all anyone wants to talk about, which is the Wall Street part of it. Is Wall Street actually getting banned from the housing market? Let's dig into it. Now, the section in the bill, it's kind of funny. If you look at the bill, the section about Wall Street is literally titled, Homes are for people, not corporations. So that makes you feel like, oh man, they're getting Wall Street completely out of the housing market.

19:34That's not exactly what's going on here. So let's talk about what's actually in the bill. The big headline is that it bars institutional investors, which they define as organizations that own 350 or more homes. Not really sure where they came up with that number, 350, but that's where they came up with 350 or more homes from buying single family houses on the open market. So that's a thing, right? Like it does actually stop you from buying single family houses on the market. And there's some teeth to it, right? There are real penalties. Like the penalties for doing it can be up to a million dollars or three times the price of the home.

20:13It also opens the door if states want to like pass stricter bans. Right. But there is a little bit of teeth to that. There are a lot of exceptions that I think it's not really going to stop institutional ownership. Right. Big landlords, people like, you know, Invitation Homes, Tricon, Pre-DM, like they could still buy rental homes under a few conditions. So there are two big exceptions. One, if they make renovations, which is kind of what they do, right? They don't really go out and buy that many turnkey homes. Sometimes they do. They were during COVID. But if they buy something and fix it up, they're still allowed to do it.

20:46Or if they give tenants a chance to buy the home and do sort of a rent-to-own kind of model, they can do that. So that's one carve-out. Another carve-out is they can still sell and buy homes from each other. I don't know how much that really happens, but that is still possible. And one of the bigger ones is they can still buy build-to-rent product. So if a developer goes out and carves something out as build to rent, those big institutional players can still buy it. So I would say, is this a ban on institutional buyers? No, definitely not. It's kind of just like setting some rules and guidelines about what parts of the housing market institutional owners can play in.

21:27As some context, I just kind of want to remind everyone that I personally do not think that Wall Street is the problem in the housing market. I'm not saying I love that they participate in the housing market. If they got banned, I wouldn't really care personally. It doesn't really matter to me that much. I am not some huge fan of giant corporations owning rentals. I would rather mom and pop investors like you and me own that. Small entrepreneurship, small businesses, people pursuing financial freedom, I would prefer that. But I just kind of want to be honest that big firms own about 3 % of single family rentals.

21:59The bigger pockets community may own more rentals than all of Wall Street combined. I don't really know, but like we have 3.5 million people in the bigger pockets community. 90 % of rentals are owned by people with 10 units or fewer. So like it is kind of possible. It's interesting, right? Anyway, I think that institutional buying panic, it's just kind of like overblown, but this will have some effects. Like what's happening recently is that institutional investors have slowed down waiting to see what these provisions are. We've seen a lot of big institutions basically stopped buying. Some of them were actually like laying off employees on this.

22:36And so even though I think, you know, just to be candid, what's in this bill is a little bit more political pandering. Again, it's by both sides. It's a bipartisan bill. You know, they want to say, hey, we got Wall Street out of housing. Not really. I don't really think they did. It just kind of like reshapes how these institutions are going to go about participating in the real estate market. They're moving them more towards build to rent and for renovating, which is fine in my opinion, right? Like I think build to rent has an important part in the housing market. I think it could actually add supply, right?

23:08Like if developers are encouraged to create build for rent, like that could create more rental supply and improve affordability. But I think the thing for us is that for small and midsize investors, there's this pullback that's going on right now. And it might not last in institutional buying. It could be a window. There's less competition right now in the resale and open market for the next year or two when they're trying to figure out what to do, where to allocate capital. These are big institutions. And although they're not like the government and how slow they move, they're probably still going to take some time to figure out what the next play is.

23:45And in a buyer's market like we're in right now, that reduced competition does create an opportunity for small and midsize investors. So if you're in one of those markets in the Southeast where they had been buying, you know, this is a time to look, time to go find opportunity. Could they come back? Yeah. And so I think this is kind of a window that you should look at if you're in Florida or Tennessee or South Carolina or Phoenix, Texas, you know, a lot of the Sunbelt basically where these institutions are super active. This might be your window right now to out-compete them and get great assets at good prices because we're in a buyer's market.

24:22A lot of those markets are in a correction. You're going to have lower competition. That's a good time to buy. Still got to buy smart and do everything we talk about. But I think that's the headline here is that they're going to probably pause and you can keep going. So that's my advice on the housing bill. We're going to have to see everything else. but that's kind of the near-term thing that I think could benefit small and mid-sized investors like all of us. So that's our second story. We have one more about cracks in consumer credit and I'll of course share why you should care about this. We gotta take one more break though.

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