A while back I noted that mortgage rates were trending higher.
This was after a long period of trending lower. It was effectively a switch in direction.
And a notable one because we were seeing lower and lower interest rates before an abrupt shift higher, driven by the unexpected strikes in the Middle East.
Now that that seems to be partially resolved, bond yields (and mortgage rates) are finally drifting lower.
Could it be the start of a bigger move back toward the lows seen in early 2026?
Is the Mortgage Rate Trend Our Friend Again?
After a good day for bonds yesterday, they extended their move today on the back of a PCE inflation report that came in as forecast.
While the Federal Reserve’s preferred inflation gauge hit its highest level since late 2023 (incidentally when the 30-year fixed also peaked around 8%), it was in line with the Dow Jones consensus.
And given the Middle East accord and rapidly falling oil prices, it seems investors aren’t so concerned with inflation as they were a week or a month ago.
This has pushed 10-year bond yields lower, from a recent peak of 4.66% in mid-May to around 4.38% today.
In other words, yields are about 30 basis points lower than they were a month ago and could continue to move lower as oil prices ease.
Lower oil prices will assuage inflation concerns in the process and arguably get us back on track to where we were before the conflict began.
That’s perhaps the rationale for why mortgage rates are getting better, finally.
The big question is if they have can continue to rally over time and avoid any setbacks.
And if they can make a complete move back to those levels seen pre-war at the end of February.
Can Bond Yields (and Mortgage Rates) Fall Back to Pre-War Levels
We already have oil prices back at about pre-war levels. So why not bond yields?
If the move the past few months was mainly about the war and rising oil prices, shouldn’t bond yields come back down too?
It’s logical, though as we know these things always take time to materialize.
The old adage elevator up, stairs down comes to mind. Mortgage lenders are quick to raise rates and slow to drop them.
And you can’t really blame them. But if we drop another 30-odd basis points, we’ll be back to those levels from February.
So in a sense we are halfway there and if we can keep the momentum, we can return to a sub-6% 30-year fixed.
The 10-year bond yield was around 4% when the 30-year fixed was able to muster a 5-handle, albeit briefly.
That’s basically where we need to get to if we want mortgage rates starting in the 5s again.
It’s possible, but likely won’t happen too quickly given the caution at the moment regarding possible rate hikes, frothy tech stock valuations, and even a potential setback in the Middle East.
In the meantime, be happy mortgage rates didn’t return to 7% due to an even more protracted conflict with Iran.
Things could have actually been a lot worse.
- Are Mortgage Rates Finally Poised to Start Falling Again? - June 25, 2026
- Mortgage Rates Are Having a Good Day as Oil Prices Fall to Pre-War Levels - June 24, 2026
- You Can Still Get a Sub-6% Mortgage Rate, But Is It Worth It? - June 23, 2026