{"id":50531,"date":"2026-05-20T18:19:56","date_gmt":"2026-05-20T15:19:56","guid":{"rendered":"https:\/\/mk.gen.tr\/how-much-higher-can-mortgage-rates-go\/"},"modified":"2026-05-20T18:19:56","modified_gmt":"2026-05-20T15:19:56","slug":"how-much-higher-can-mortgage-rates-go","status":"publish","type":"post","link":"https:\/\/mk.gen.tr\/en\/how-much-higher-can-mortgage-rates-go\/","title":{"rendered":"How much higher can mortgage rates go?"},"content":{"rendered":"

What a crazy few days for the 10-year yield and mortgage rates. As soon as the 10-year yield broke the key technical level of around 4.46% and it was apparent that we weren\u2019t 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\u2019s currently at 4.61%, and mortgage rates<\/a> hit a high of 6.75% yesterday. <\/p>\n

The question is: now what? How much higher can the 10-year yield and mortgage rates go? What are the key variables we should be tracking?<\/p>\n

1. Iran conflict deal<\/h2>\n

In the 2026 HousingWire forecast<\/a>, I anticipated the following ranges:<\/p>\n

Mortgage rates between 5.75% and 6.75%<\/p>\n

The 10-year yield fluctuating between 3.80% and 4.60%<\/p>\n

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. I was a bit more bullish on the economy than most, so yields did have some upside. Inflation picked up before the conflict and the labor data is so close to my break-even rate of 78,000 jobs per month, which implies upside on yields even without the conflict.<\/p>\n

However, the recent volatility in the 10-year yield and mortgage rates is solely due to the lack of a deal with Iran. 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.<\/p>\n

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<\/a> that we had a clear pathway to 4.60% on the 10-year yield, as the conflict was taking too long.<\/p>\n

Now, the conflict can get much worse than what we have today if we don\u2019t get a deal. If this lasts from June through September, all bets are off on how much the Fed would need rates to rise to kill demand enough to make sure oil prices don\u2019t get much worse. We do have upside risk, but mortgage relief can happen very easily with a deal.<\/p>\n

2. Mortgage spreads<\/h2>\n

Mortgage spreads have held steady for now, as the Fed hasn\u2019t signaled a push to raise rates too much higher from where we are today and we don\u2019t have recessionary data yet. In reality, we went from two to three rate cuts in 2026 to no rate cuts and now a rate hike in play. And, if spreads reach their 2026 highs, we can add 20 basis points of risk to mortgage rates heading higher without the 10-year yield moving up at all. If the spreads get worse than that 2.11% level on the chart below, you have more upside risk.<\/p>\n

Let\u2019s take a look at the closing spread levels of last week at 1.92%. Remember, the high of 2026 so far has been 2.11% with the low at 1.82%.<\/p>\n

If we had the worst mortgage spread levels of 2023, mortgage rates would be 7.94% today, not 6.75%.<\/p>\n

If we had the worst levels of 2024, mortgage rates would be 7.56% today.<\/p>\n

If we had the worst levels of 2025, mortgage rates would be 7.37% today.<\/p>\n

3. The Fed<\/h2>\n

Here is where I believe the big risk lies, but also the trickiest variable. The 10-year and 30-year yields have priced in a lot of tighter Fed policy, based on inflation and labor data being better, but the Fed funds market is really only pricing in one future rate hike. <\/p>\n

If more Fed governors start talking about more Fed rate hikes \u2014 not just one but a few \u2014 rates and spreads can pick up together. This is a big if because the Fed knows that if it pushes the needle on this too much now, it could dampen growth. So this is the tricky variable, given the timing of oil inventories and inflation\u2019s impact. However, the big risk I see is the Fed becoming hawkish enough to prompt the market to price in multiple rate hikes.<\/p>\n

Conclusion<\/h2>\n

Yesterday, mortgage rates were at 6.75% \u2014 reaching the high end of my forecast for 2026. A lot has been priced in for 2026 based on current Fed policy. If the conflict ends soon, a lot of the above variables go out the door, but if the conflict continues, labor stays firm, and the Fed gets more hawkish, we can see 0.375%-0.43% higher mortgage rates from here because a lot has been priced in already.\u00a0<\/p>","protected":false},"excerpt":{"rendered":"

What a crazy few days for the 10-year yield and mortgage rates. As soon as the 10-year yield broke the key technical level of around 4.46% and it was apparent that we weren\u2019t 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….<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts\/50531"}],"collection":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/comments?post=50531"}],"version-history":[{"count":0,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts\/50531\/revisions"}],"wp:attachment":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/media?parent=50531"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/categories?post=50531"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/tags?post=50531"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}