US Mortgage Rates Break 7% as Treasury Yields Hit Multi-Decade Highs

What Happens Next

• →US home builders face a 15-25% reduction in new construction starts as mortgage applications decline, triggering layoffs in construction, lumber, and home furnishing supply chains.
• →Higher Treasury yields draw capital from emerging markets and risk assets into US fixed income, strengthening the US dollar and compressing profit margins for US exporters.
• →Australian households, squeezed simultaneously by rising mortgage costs and elevated fuel prices, reduce discretionary spending further, pressuring retailers and hospitality businesses dependent on consumer confidence.
• →Institutional portfolios heavy in long-duration bonds sustain mark-to-market losses, forcing pension funds and insurers to rebalance toward shorter-duration instruments and reducing liquidity in long-term credit markets.

Near-term: US housing transaction volumes drop 10-20% within 1-3 months as buyer qualification thresholds tighten; Australian discretionary retail reports negative same-store sales growth. Long-term: Over 2-5 years, sustained high borrowing costs drive a structural shift toward longer renting periods in both the US and Australia, reducing homeownership rates and expanding institutional rental markets.