Mortgage rates are at yearly highs, but housing demand is still positive

Mortgage spreads fell to 1.92% while the 10-year yield rose to 4.596% after a bond-market selloff linked to the Iran conflict and oil risks. At prior peak spreads, mortgage rates would have been 7.27% to 7.84%, but current housing demand indicators stayed slightly positive. Weekly pending home sales remained positive year over year, and weekly mortgage purchase applications were positive year over year and week over week. Mortgage rates have historically slowed demand when they rise above 6.64% and especially above 7%. Forecast ranges expected mortgage rates between 5.75% and 6.75% and the 10-year yield between 3.80% and 4.60%, with the 10-year closing near the top of that range. Mortgage spreads are a positive factor for 2026, though the June-to-September period remains a concern if no deal reduces conflict and oil pressure.

"Mortgage spreads fell to 1.92% even as the 10-year yield rose to 4.596% after a selloff tied to the Iran conflict and oil risks. At prior peak spreads, mortgage rates would be 7.27% to 7.84%, while current housing demand indicators remain slightly positive. The weekly mortgage purchase application data was positive year-over-year and week-over-week."

"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 closed last Friday at 4.596% on the 10-year, which was the high end of my 2026 forecast. Back in March, I wrote that if this conflict continues, we have a clear pathway to 4.60% on the 10-year yield, which would take us to 6.75% on mortgage rates."

"My real concern is the June to September timeline; our oil reserves are dwindling and by the second week of June, we will be in a bad place and things just get worse if no deal is made. This is all about the Iran conflict now, as the market is now pricing a rate hike in 2027. Mortgage spreads remain a positive story for housing in 2026, as mortgage rates would be closer to 8% today if we had the worst levels of mortgage spread from 2023."

"However, when mortgage rates rise above 6.64% and get over 7%, housing demand has slowed over the past few years. Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads closed at 1.92%, down from from"

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