I still get the feeling that mortgage rates are going to go HIGHER before they cool off again.
I’m aware there are rumblings of some sort of accord in the Middle East, but I’ve also seen this movie before.
It takes time to resolve big, global conflicts, and if Iran opens the Strait of Hormuz, they might give up all of their leverage.
In the meantime, the U.S. blockade remains and the two sides continue to spew divisive rhetoric toward one another.
That tells me this isn’t in the final innings and will likely drag on, leading to higher inflation and higher mortgage rates.
Is the Strait of Hormuz Everything for Mortgage Rates Right Now?
There is reportedly a “framework” to open the important Strait, end the blockade, and withdraw U.S. military in the area.
But this isn’t the first time we’ve heard about a possible deal, negotiation, or “memorandum of understanding” between the two countries.
Problem is both are continuing to posture and act like the “winners,” a veritable standoff that doesn’t seem close to being resolved.
Even if were to end today, the oil disruptions would take a good three to six months to resolve themselves.
It’s nearly June, so we’re talking into 2027 potentially if it ends right NOW, for oil flows to normalize.
Assuming it isn’t ending today, then that means we’re definitely into the New Year with energy prices still elevated.
While that (hopefully) sorts itself out, hopefully, inflation will remain elevated as oil and gas touch just about everything that is bought or sold.
As such, the Fed will be stuck and unable to cut, though I don’t think they’ll hike either, especially with new Fed chair Kevin Warsh hired to be what I’ve affectionately coined “the cut man.”
If nothing else, he would likely persuade the other voting members to at least sit tight.
The takeaway here is that there will be elevated inflation for the rest of the year, and all cuts are officially off the table as well.
Bond yields should also remain elevated, and any aggressions in the conflict could send them to new 2026 highs.
We just had a 2026 high of 4.69% on May 19th and it wouldn’t shock me to see that number tested in the next month or two.
Mortgage Rate Chart Shows Higher Highs
I was looking at a mortgage rate chart from Mortgage News Daily and a pattern emerged.
Higher highs. We saw mortgage rates initially jump at the end of February on the Iranian conflict getting underway.
Then we saw relief in April on hopes of some sort of quick deal. Didn’t happen.
Then just like that, rates shot back up in mid-May after a hotter-than-expected CPI report and reached their highest levels of the year.
The past week provided some relief, but is the next move a higher high for the year?
It wouldn’t shock me to be honest. Looking at this chart, you can see pullbacks are short-lived and followed by new highs.
Perhaps surpassing 6.75% this time and rising another eighth of a percent to around 6.875%.
And that might not be all. We could keep going higher and rise above 7%, assuming the impasse continues on.
A recent note from Piper Sandler laid out a scenario where the Strait remains closed for a prolonged period and oil prices hit new highs this summer.
It’s not so hard to believe, and if it happens, a new higher high for mortgage rates should not only be a possibility, but an expectation.
Read on: There’s only a 50/50 chance of mortgage rates rising above 6.8% this year?
(photo: FutUndBeidl)
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- There’s Apparently Only a 50/50 Chance Mortgage Rates Rise Above 6.8% This Year - May 25, 2026