Now that mortgage rates are the highest they’ve been since early 2025, the next logical question is how high will they go?
How high do mortgage rates go this cycle?
We’re currently averaging around 7.25%, so the next stop could be 7.50% and eventually 8%.
For the record, 8% is the current cycle high for the 30-year fixed, last seen in October 2023.
Hopefully it doesn’t come to that, but it’s certainly not out of the question.
How High Will Mortgage Rates Go?
As you can see from this chart from Mortgage News Daily, it’s been a rough ride for mortgage rates lately.
They’ve ascended all the way from sub-6% levels in March to above 7.25% in the span of about six months.
What’s worse than the rise is the fact that prior to the climb, they were at the best levels since mid-2022.
If you recall, mortgage rates were still in the low 3s in early 2022, so getting back to anywhere in the year 2022 was a pretty solid achievement.
But instead of building off that momentum, mortgage rates took a turn for the worse after the conflict broke out in the Middle East.
While there have been some periods of respite along the way, it’s been mostly up, up, up since then.
Now I’m wondering just how high we go and when things finally improve.
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Next Stop for the 30-Year Fixed Could Be 7.50%
Logically, the next stop could be 7.50% if we look at rates in eighths and quarters of a percent.
The last time the 30-year fixed was that high was back in the spring of 2024.
Clearly it was a tough period for the housing market, though rates were off their highest-highs of the current cycle at the time.
Given rates are already slightly north of 7.25%, it wouldn’t take much to climb to 7.50%.
Really, you’d just need more of the same that we’ve experienced over the past six months.
More inflation, sustained high oil/energy prices, and no improvement in the Middle East.
That would likely be enough to push mortgage rates up to the next tier.
What About 8% Mortgage Rates Again?
As noted, the 30-year fixed hit a cycle-high of about 8% back in mid-October 2023.
That turned out to be the high this cycle, fortunately. But the cycle isn’t over yet…
And we’re now approaching those levels again, with some ugly tailwinds that could push mortgage rates right back there.
We’ve got the Iranian conflict, $100 oil prices, skyrocketing diesel prices, and renewed inflation concerns.
Oh, and lots of government debt.
It all points to higher-for-longer and multiple Fed rate hikes over the next 12 months.
At last glance, there are now four more rate hikes anticipated between now and next summer.
But the market has been pricing those in already, as evidenced by 30-year mortgage rates climbing back above 7.25%.
That means there could be limited additional upside for the 30-year fixed. Even with four more Fed rate hikes, mortgage rates might have most of this expectation priced in.
So maybe you go up another 0.375% to .50% from here if all the hikes happen, putting the 30-year fixed just shy of 8%.
Conversely, things settle down, there’s a peace deal, oil comes down, yields fall again, all those hikes don’t happen.
It will depend on what transpires though. More bad news on government debt, inflation, and Middle East geopolitics can certainly push mortgage rates even higher than 8%.
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