Sep 25, 2026 · 5 min
Mortgage rates above 7% sharpen Bessent’s political challenge
UBS On-Air: Paul Donovan Daily Audio 'House problems'
Higher borrowing costs are squeezing new homeowners while official inflation measures may understate the pressure facing household budgets.
- 1US bond yields and mortgage rates have risen above 7%, drawing political and media scrutiny.
- 2Higher mortgage payments reduce the spending power of people buying homes at today’s rates.
- 3Official inflation data understates housing-cost pressure by relying on an unrealistic measure of housing expenses.
Don't miss
Donovan’s central argument is that recent homeowners feel a mortgage-cost squeeze that official inflation data fails to capture.
The brief
Paul Donovan opens with US bond yields and mortgage rates above 7%, framing higher borrowing costs as both an economic strain and a political problem.
The pressure falls especially hard on new homeowners, whose larger mortgage payments leave less money for other spending and weaken household purchasing power.
Donovan argues that official inflation data misses part of this squeeze because its measure of housing costs does not reflect the experience of recent buyers.
That gap puts Treasury Secretary Scott Bessent at the center of a difficult challenge: borrowing costs are visible to households even when headline inflation measures soften.
What was said on this episode
12 statements · 3 positive · 7 negative · 2 neutral
Rising US bond yields have increased US mortgage rates despite Besant’s measures.
“The recent rise in bond yields, in defiance of Besant's half-hearted measures to contain them, has pushed up US mortgage rates.”
Listen at 0:15
The effective rate on outstanding US mortgages has been gradually increasing.
“The effective mortgage rate for outstanding mortgages in the United States has been creeping higher for some time”
Listen at 0:40
US real income growth is approximately zero.
“real income growth is basically zero in the United States”
Listen at 0:55
US consumers rely on reducing savings to maintain progress.
“consumers are dependent on reducing savings in order to move ahead”
Listen at 1:01
US households have less spending power than real-income data suggests.
“the US household has a little less spending power than the very anemic real income growth might actually suggest”
Listen at 1:31
Tariff demands are linked to negotiations over classifying UK goods as made in Europe.
“The demand for tariffs is part of negotiations to allow UK goods to be classified as made in Europe.”
Listen at 2:06
The EU is arguably the world’s wealthiest consumer bloc.
“The EU is arguably the wealthiest consumer bloc in the world”
Listen at 2:21
The EU’s consumer-market power enables it to impose rules on external exporters.
“That allows the EU to set rules and regulations that may have to be followed by countries and exporters outside of the bloc just to get access.”
Listen at 2:32
US consumer inflation expectations have little effect because consumers lack pricing power.
“US consumer inflation expectations do not matter because consumers do not really have the power to act on their expectations.”
Listen at 2:54
The US is not experiencing wage-price spirals.
“There are no wage price spirals going on.”
Listen at 3:02
The Xi-Trump summit is producing no market-significant outcomes.
“The summit between China's President Xi and US President Trump is producing pretty much what was expected, which is to say nothing of market significance.”
Listen at 3:20
The Xi-Trump summit has not produced diplomatic incidents so far.
“there have not been any diplomatic incidents”
Listen at 3:30
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.