Welp, I’ve been warning folks for a while now and here we are. New 2026 highs for the 30-year fixed.
Sooner or later, the protracted Iranian conflict was going to catch up to us.
You can’t have $100 a barrel oil and not expect inflation to rise, which translates to higher bond yields and mortgage rates.
And so after some suspiciously low interest rates for the past month and change, we are on the rise again.
The next logical question is just how high mortgage rates might go before we get relief again.
The 30-Year Fixed Hits a New High for the Year
At last glance, the 10-year bond yield was up a massive 12 basis points on the day thanks to the ongoing conflict in the Middle East.
While we had been promised there would be a swift resolution for weeks, it has failed to materialize.
In the meantime, we’ve since seen hot inflation reports, whether it’s CPI or PPI.
There’s just no way around it when oil is consistently priced at over $100 per barrel. It’s not just gas prices. Oil touches everything we buy.
Adding to the worries was President Trump’s visit to China with leader Xi Jinping and fears a conflict could transpire with Taiwan.
That could turn the current conflict into a wider, global ordeal, though at the moment that’s simply rhetoric.
Still, it’s clear the Iran situation is reason enough for bond yields to be higher and for inflation fears to be fully renewed.
That means just one thing for mortgage rates. Higher ones! Bonds despise inflation and if it’s expected to ramp up again, well, so is your 30-year fixed mortgage rate.
Just How High Will Mortgage Rates Go?
The next question to ask, since it’s clear mortgage rates are now on an upward trajectory, is how high?
How high might they go before things settle down again? And when will they reverse course?
Well, I’ve said for a while now that they were going to go up. I was honestly surprised they stayed as low as they did.
I think a lot of folks were a hair too optimistic that we’d score a peace deal. Iran had other thoughts.
But now it appears reality is setting in. Today, the 30-year fixed might match its 2026 high of roughly 6.625%.
From there, we might go to 6.75%, 6.875%, and dare I say a 7-handle before things top out.
That was once unthinkable, as it appeared those “high rates” were behind us. But now it’s only a stone’s throw away.
It really depends on what transpires in the conflict and if the economic data continues to come in hot.
I’ve mentioned several times that mortgage rates are highest in May and June, historically.
So if they hit their highs of the year this month and next it would be basically right on cue.
The good news is I do think we eventually find a resolution and things settle down, potentially before the midterms in November.
Not necessarily because of those elections, but because enough time will have passed that we can figure out some sort of diplomatic solution.
And speaking of timing, mortgage rates tend to be lowest in winter, so perhaps they peak in the summer, and begin easing later in the year.
The bad news is they’re likely going to throw cold water on the spring housing market and it’s going to be another dismal year for home sales, which have been stuck at 30-year lows now for the past couple years.
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