The Mortgage Market’s New Normal: High Rates, Global Tensions, and Structural Shifts
Mortgage professionals hoping for rate relief in 2025 may need to recalibrate their expectations. In the latest episode of Optimal Insights, Jim Glennon is joined by Jeff McCarty and Alexander Hebner to discuss the macroeconomic forces keeping interest rates elevated – and why this may be the new normal for the foreseeable future.
From global debt surges to foreign investor taxation, the conversation reveals a complex web of structural shifts that are reshaping the mortgage landscape.
Here’s what you need to know this week.
Key Trends Shaping the Mortgage Market
Rates Remain Stubbornly High
OBMMI 30-year fixed sits at 6.84%, with volume up ~15% YoY.
Despite high rates, purchase and cash-out refi activity remains resilient.
The yield curve is flattening at the long end – 10- and 30-year Treasuries are diverging, signaling long-term inflation and debt concerns.
“And this isn't just about Fed expectations. This is kind of a global problem. The Fed isn't going to just cut rates on its own without looking at the entire global picture.” – Jeff McCarty
Inflation Metrics Offer Mixed Signals
April’s PCE data showed core inflation at 2.5%, but volatility in financial services and insurance categories could skew future readings.
Energy prices – historically a major inflation driver – have remained stable, thanks in part to increased OPEC output.
Labor Market Cracks Are Emerging
Weekly jobless claims are rising, with 240K reported last week.
Residential construction employment is plateauing – often a leading indicator for housing market shifts.
Global Forces Driving Mortgage Rates Higher
The Debt Deluge
The U.S. must refinance 30% of GDP in maturing debt this year – over $9 trillion.
Add to that the proposed “Big Beautiful Bill,” which could inject another $3 – 4 trillion in deficit spending.
Result: Bond markets are demanding higher yields, pushing long-term rates higher.
Section 899: A Capital Market Curveball
A proposed surtax on foreign investors (starting at 5%, rising to 20%) could trigger capital flight.
With over 30% of U.S. debt held abroad, this policy could significantly reduce demand for Treasuries – raising borrowing costs across the board, including mortgages.
Deglobalization & Defense Spending
European nations are ramping up defense budgets, flooding markets with sovereign debt.
The cooperative era of globalization is giving way to fiscal nationalism – further straining global capital markets.
Practical Actions You Can Take Today
Watch Treasury Auctions: June 11 – 12 will be key indicators of investor appetite for long-dated U.S. debt.
Prepare for Prolonged High Rates: ARM products and short-term financing strategies may offer more flexibility in this environment.
Monitor Global Policy: Tariffs, foreign investor taxes, and geopolitical shifts are no longer background noise – they’re front and center in rate dynamics.
The mortgage market is no longer just a reflection of domestic monetary policy. It’s a mirror of global capital flows, fiscal policy, and geopolitical strategy.
“Structural shifts like this have fundamentally changed our outlook. I don't see a decrease in 1 to 2% in rates anytime soon because of that.” – Jim Glennon
Listen to the latest episode of Optimal Insights for deeper analysis and expert commentary. Available on all major podcast platforms: https://optimal-insights.captivate.fm/listen
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.