How much higher can mortgage rates go?

The 10-year yield rose after breaking a key technical level, moving from about 4.42% to a high near 4.68% and settling around 4.61%. Mortgage rates reached about 6.75% during the same period. Prior forecasts expected mortgage rates between 5.75% and 6.75% and the 10-year yield between 3.80% and 4.60%, with the high end now reached. The main driver of recent volatility is the lack of a deal with Iran, which can worsen conflict risk and increase oil-driven inflation. If oil inflation persists from June through September, the Fed may need to keep rates higher to reduce demand, pushing mortgage rates above 6.75%. A deal would likely lower yields and mortgage rates.

"With spreads near 1.92%, most rate damage may be in, unless oil driven inflation persists and the Fed turns more hawkish. That combination could raise mortgage rates above 6.75%."

"As soon as the 10-year yield broke the key technical level of around 4.46% and it was apparent that we weren't getting a ceasefire deal with Iran anytime soon, the 10-year yield went from 4.42% last Thursday to a high of 4.68% yesterday. It's currently at 4.61%, and mortgage rates hit a high of 6.75% yesterday."

"In the 2026 HousingWire forecast, I anticipated the following ranges: Mortgage rates between 5.75% and 6.75% The 10-year yield fluctuating between 3.80% and 4.60% We have now hit the high end of this forecast, but my forecast was based on inflation rising more than expected and the labor data firming up."

"The risk now is that, as we get closer to June, the likelihood of an oil-inflation pushover effect on inflation data from June to September increases as oil reserves dwindle. In short, if we get a deal with Iran, that would be positive for yields and mortgage rates to fall. On March 21, I wrote that we had a clear pathway to 4.60% on the 10-year yield, as the conflict was taking too long."

Read at www.housingwire.com