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Mortgage rates HousingWire 2h ago

Will mortgage rates rise to 8% or drop to 6%?

Mortgage spreads rose to 1.97% as rates closed at 7.20%, while oil stayed near $100 and the Fed began a new hike cycle.

Logan Mohtashami · HousingWire

Mortgage rates are over 7% again, something very common in the past few years, but 2026 was supposed to be the first year that mortgage spreads were going to shield the housing market from rates getting above 7%. However, as we enter the seventh month of the conflict with Iran, oil prices are at $100, inflation is above target, the unemployment rate is 4.1%, jobless claims are low, nominal growth is still positive and the Fed just started a new rate-hike cycle. I discussed this with Editor-in-Chief Sarah Wheeler on this episode of the HousingWire Daily podcast and wrote this article with a ton of charts.

Let’s take a look at the Housing Market Tracker data and what can drive rates down to 6% or push them up to 8%.

10-year yield and mortgage rates

In the 2026 HousingWire forecast, I anticipated the following ranges:

Mortgage rates between 5.75% and 6.75%
The 10-year yield fluctuating between 3.80% and 4.60%

Obviously, things changed this year with the conflict. I believe mortgage rates would have ranged between 6.25%-6.50% if the conflict had never happened, as the 10-year yield should have ranged between 4.31%-4.60% with the economic and labor data improving that Fed Chairman Warsh discussed. But the question now: will we see rates back to 6% or up to 8%?

The case for 8% mortgage rates

For me, the case for 8% is simple: the conflict needs to get worse. We are seven months into this conflict, and we have other parties joining the war, as the Houthis just bombed a Saudi Arabian airport today. President Trump has said nothing will change until the midterm elections are over. So, if there is no deal with Iran, the odds of things getting worse are in play.

Since the bond market has been trading more in tandem with oil prices lately, getting near 8% on the 10-year yield would need a push toward 5.40%, a level last seen in March of 2002. The economic data needs to be solid during this last push too.

Mortgage spreads would need to get just a bit worse to get to 8%, and the Federal Reserve would have to stay silent on the long bond heading higher. Scott Bessent’s “house” trade hasn’t worked and he won’t go to his bigger guns.
While that might not get you exactly to 8%, that scenario can get you close. We would also see rates rise if the Fed talks about a rate-hike cycle, not just reversing the interest-rate cuts from last year and raising rates to cycle highs.

So, in short, rates could go near 8% if the conflict worsens, the spreads get just a little bit worse and the economic data stays solid.

The case for 6%

For me, it has been the same story for the last three years and nine months: mortgage rates only come down toward 6% when the bond market believes the labor market and economy are slowing down, and now that the Fed is hiking again, yields can fall if they get a whiff of real softness.

However, more needs to happen, of course. The conflict has to end and oil prices need to come back down, as they did with the Trump administration’s MOU with Iran in June. Also, the trade war 2.0 can’t get worse with Canada or anyone else Trump wants to slap tariffs on. This can help move rates lower, but in reality we only got toward 6% in the past few years when the economy gets softer. Now that we aren’t cutting rates to neutral policy anymore, getting toward 6% just got harder.

My base case

What I discussed in early July is that if the conflict ends and oil goes lower, we should look at a base case of mortgage rates between 6.50%-6.75 % and the 10-year yield heading back to 4.48%, and work from there. My worst-case scenario, assuming the conflict worsened, was just 0.375%-0.43 % higher than the 6.75% forecast, which is basically 7.13%-7.18 %. We just closed the week at 7.20%. So we are already at my worst case.

If we get the conflict over and oil and bond trading positive, we can reassess where we are in the economy and the Fed. However, until then, don’t think about rates going under 6.50% anytime soon; we have work to do.

Mortgage spreads

Mortgage spreads have tried their best this year to keep mortgage rates from breaking over 7%, but the conflict was simply too much. How mortgage spreads are acting now, even with all the drama in the world, is normal compared to how they acted in previous decades. The main concern is whether the Fed gets more aggressive with its rate-hike cycle. That could push spreads higher.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads were up at 1.97%, up from 1.92% the week before.

Let’s compare last week’s mortgage rates to where they would have been over the last three years, given the 10-year yield’s current level:

If we had the worst mortgage spread levels of 2023, mortgage rates would be 8.34% today, not 7.20%.
If we had the worst levels of 2024, mortgage rates would be 7.96% today.
If we had the worst levels of 2025, mortgage rates would be 7.77% today.

Note: This is the 2nd week after the Labor Day holiday. Two weeks ago, a lot of data lines got hit; all of them rebounded. This will happen again during Thanksgiving, Christmas, and New Year’s. Starting from next week, we will be back to normal weekly data.

Weekly pending sales

Our pending home sales data provides a week-to-week perspective, though holidays and short-term fluctuations can affect results. This weekly pending sales data typically takes 30-60 days to be reflected in the sales data.

It’s no secret that over the past few years, when rates get above 6.64% and head above 7%, housing slows down, and when they get below 6.64% and head toward 6%, housing sales grow. Now the moves on a year-over-year basis aren’t big on the decline part and haven’t been for a while now, but until this changes, keep the plan simple.

The snapback you saw here is just labor-related; nothing else.

Here are the pending sales for last week over the last two years:

2026: 62,300
2025: 64,391

Purchase applications

Purchase application data, which looks out 30-90 days, has shown softness as mortgage rates have risen above 6.64% and are now above 7%. Since we are working with higher comps, this area should see some year-over-year weakness, especially now that the year-over-year comps will be harder. This was the case last week, as purchase apps were only down 1% week-to-week but down 19% year-over-year.

Here are the stats on purchase apps so far in 2026:

15 positive week-to-week prints
18 negative week-to-week prints
5 flat week-to-week prints
10 weeks of double-digit year-over-year growth
25 weeks of positive year-over-year growth
8 negative year-over-year prints

Housing inventory

Housing inventory growth has been very tame this year, with certain weeks being negative year over year. As always, it’s been hard to get inventory growth when mortgage demand is rising; it’s easier when mortgage demand isn’t growing. However, part of the slow growth is that inventory levels are almost back to normal. For our data, it’s typically a tad over 1 million active listings during the seasonal peak months.

Also, keep in mind that year-over-year comps will support stronger inventory growth, as rates at this time last year were falling and demand picked up. This week’s snapback is also typical for the second week after a major holiday weekend.

Weekly inventory change (Sept. 11-Sept. 18): Inventory rose from 873,978 to 890,303
Same week last year (Sept. 12-Sept. 19): Inventory rose from 846,529 to 863,022

New listings

New listings are in their typical seasonal decline; 2026 was the healthiest new listings year since 2022, with over 80,000 a few times this year. Outside of that, not much is happening with new listings. We still want to keep this trend going through the rest of the year, and hopefully higher rates do curb new listings for the last three months of the year beyond the normal decline.

Normally, new listings range between 80,000 and 100,000 every week during peak periods. For context, during the housing bubble years, new listings ranged from 250,000 to 400,000 per week for several years.

The snapback here is Labor Day-related.

Here is last week’s new listings data for the past two years:

2026: 72,616
2025: 66,241

Price-cut percentage

Typically, about one-third of homes see price reductions before they sell, reflecting the housing market’s dynamic nature. Overall, price-cut percentages this year have been lower than last year until rates moved above 6.64%. Many weeks ago I talked about how I believe that the higher rates go, we should catch up and eventually should pass last year’s data. We also have to remember, last year at this time rates were lower, and demand was picking up.

In my 2026 home-price forecast, I called for a national decline of -0.62% for the year. Home-price growth really isn’t going anywhere this year, and my forecast of -0.62% might be hard to achieve, as most home price indexes show price growth between 1% and 2%. However, with rates rising again, I might be right in 2026.

The price-cut percentage for last week:

2026: 42.06%
2025: 41.5%

The week ahead: Iran, Fed speeches and new home sales

Iran is front and center, as always. Now that the Houthis are blowing stuff up, the conflict has expanded with more players. The closer we get to the midterms, the more pressure will be put on oil prices from more conflict-related headlines. We’ve had a lot of news over the weekend because of the Houthis’ action but we’ve also seen headlines suggesting China and Iran might want to rein in the Houthis because things could get out of control.

This week we will also have new home sales and Fed speeches. The Fed speeches are very important now as the new Fed rate-hike cycle has begun and people want to measure how many rate hikes the Fed wants to do. It should be another interesting week.