U.S. mortgage rates approach 7%, hitting over a one-year high; Vice President Vance publicly urges the Federal Reserve to cut rates

According to Zhihu Finance APP, U.S. Vice President Vance publicly called on the Federal Reserve to cut interest rates on Thursday, stating that lowering borrowing costs would help improve U.S. housing affordability, and that based on recent inflation data, a rate cut would be “an appropriate and responsible” policy choice. As Vance made these remarks, the average 30-year fixed mortgage rate in the U.S. rose to 6.71%, reaching its highest level in over a year and gradually approaching the 7% threshold. With U.S. Treasury yields continuing to rise, high financing costs are once again suppressing homebuying demand, making housing affordability a key argument for the Trump administration to pressure the Federal Reserve.

However, while the White House is calling for rate cuts, Federal Reserve Chair Walsh has recently sent out a starkly hawkish signal, emphasizing that if inflation does not continue to decline, the Fed may need to further tighten monetary policy. With less than two weeks until the September FOMC meeting, housing market pressure, inflation risk, and the Fed’s independence are all simultaneously becoming the focus of the market.

Vance Publicly Calls for Fed Rate Cuts: Wants Americans to Afford Homes

When asked about the recent volatility in the U.S. bond market at a White House press conference on Thursday, Vance said that Trump pays close attention to interest rates, with one of the main reasons being the hope that American citizens can afford housing. He stated: “When interest rates rise, it means borrowing costs also rise.”

He further clarified that the Trump administration believes the Federal Reserve should cut rates, and said that based on recent U.S. inflation data, rate cuts are an “appropriate and responsible” move.

Vance added that the Trump administration has taken multiple measures to try to depress interest rates, “but it would be even better if we could get some help from the Federal Reserve.”

His comments come as U.S. home financing costs rise significantly. Elevated mortgage rates not only squeeze buyers’ purchasing power but are also becoming an increasingly prominent economic issue ahead of the midterm elections in November.

U.S. 30-Year Mortgage Rate Rises to 6.71%, Highest in Over a Year

Data published by Freddie Mac on Thursday showed that the average 30-year fixed mortgage rate in the U.S. rose from 6.66% the previous week to 6.71%, the highest level since July 2025. In contrast, the mortgage rate was 6.5% during the same period a year ago.

The U.S. 30-year mortgage rate had hovered around 6.5% for a long time, but is now moving closer to 7%. For buyers already under pressure from both high home prices and high financing costs, this means housing affordability may further deteriorate.

Realtor.com senior economist Jake Krimmel noted that mortgage rates were trending lower at this time last year, meaning the year-over-year data could look even worse in the coming months.

As the midterm elections in November draw near, housing affordability is becoming one of the core topics in U.S. political and economic policy discussions.

U.S. Treasury Yields Soar, Pushing Up Mortgage Costs: 10-Year Reaches 4.82%

U.S. mortgage rates turning higher is closely tied to the recent sell-off in the U.S. Treasury market. The 30-year fixed mortgage rate is typically influenced by long-term Treasury yields, and on Wednesday the yield on the 10-year Treasury rose to 4.82%, the highest since October 2023.

U.S. long-term Treasury yields are experiencing their longest sustained period of elevated rates since 2006. Massive fiscal deficits, a new wave of corporate bond issuance, and the approaching key FOMC meeting are all making investors more cautious about holding U.S. long-term Treasuries, which in turn pushes up long-term borrowing costs.

Global bond markets have also faced general pressure recently, although the current downturn is far less severe than the bond market rout of 2022. Back then, a sharp rise in inflation forced major central banks worldwide to rapidly hike rates, causing substantial drops in bond prices. Even so, the current rise in U.S. Treasury yields is already having a clear impact on the U.S. real economy’s most interest rate-sensitive sector: the housing market.

High Rates Start to Hit Homebuyer Demand, August Homes for Sale Turn Negative Year Over Year

Mortgage rates having stayed above 6% for a long time are gradually eroding U.S. homebuyer demand. Realtor.com's latest Monthly Housing Market Trends Report shows that the number of homes for sale in August decreased by 0.2% year-on-year, the first annual decline since November 2025.

Krimmel stated: “It looks like August is when higher mortgage rates really started catching up with housing demand.”

This change means that high financing costs may be shifting their impact on the real estate market from deteriorating affordability towards affecting actual transaction activity. Especially with the 30-year fixed mortgage rate moving back towards 7%, even if home prices remain unchanged, the monthly mortgage payment for buyers is set to increase, forcing more prospective buyers to postpone their purchasing plans.

White House Urges Rate Cuts, but Walsh Warns of Inflation Risks

However, as the Trump administration aims to ease housing market pressures through lower interest rates, the current policy environment the Fed faces does not support an easy pivot to easing.

Less than a week ago at the global central bankers’ meeting in Jackson Hole, Wyoming, Walsh reiterated the Fed’s commitment to bringing inflation back down to its 2% target, and emphasized that short-term interest rates remain an important policy tool for controlling inflation. Walsh said, “Short-term interest rates are the main tool for achieving the dual mandate.” His remarks were interpreted by the market as indicating that if U.S. inflation cannot convincingly fall further, the Fed may still hike rates.

This underscores a clear policy divergence between the White House and the Federal Reserve: The Trump administration wants lower rates to reduce housing and financing costs, while the Fed needs to prevent inflation from remaining persistently above target.

Recent economic data has highlighted this contradiction. The U.S. August ISM Services PMI rose to 55.4, with both business activity and new orders strengthening markedly, while the service sector price index jumped to 72.6, the highest since August 2022, indicating that even as the U.S. economy remains resilient, price pressures have not completely faded.

Fed Split Internally, September Rate Decision Remains Uncertain

The Federal Reserve itself is also divided over the next steps for policy. Fed Governor Barr said Tuesday he’s prepared to back further rate hikes if inflation remains high. But on Thursday, Governor Waller sent a different signal, indicating he currently favors keeping rates unchanged at the September meeting.

Meanwhile, the latest U.S. initial jobless claims rose more than expected, suggesting some cooling in the labor market and prompting traders to scale back bets on further policy tightening from the Fed.

Currently, market expectations about whether the Fed will hike rates at its September 15-16 meeting are roughly evenly split, meaning the policy outlook remains highly uncertain.