I still have a feeling that mortgage rates are going to go up a LOT before they cool down again.
I know there is a buzz about some kind of deal in the Middle East, but I’ve seen this movie before.
It takes time to resolve the world’s major conflicts, and if Iran opens the Strait of Hormuz, it may lose all its power.
For now, the US ban remains in place and both sides continue to spew divisive rhetoric at each other.
That tells me that this is not in the last innings and may continue, leading to higher inflation and higher mortgage rates.
Is the Strait of Hormuz All About Mortgage Rates Right Now?
There is reportedly a “framework” to open the key Strait, end the blockade, and withdraw US troops from the area.
But this is not the first time we have heard about a possible agreement, negotiation, or “memorandum of understanding” between the two countries.
The problem is that both continue to stand and act like “winners,” a disagreement that seems close to being resolved.
Even if it were to end today, the oil disruption could take three to six months to resolve.
It’s almost June, so we’re talking about 2027 if it’s possible to end NOW, so that the oil can flow back to normal.
Assuming it doesn’t end today, that means we’re definitely going into the new year with energy prices still high.
While that (hopefully) resolves itself, I expect inflation to remain high as oil and gas affect almost everything that is bought or sold.
So, the Fed will be stuck and can’t cut, even if I don’t think it will go on foot, especially with the new Fed chairman Kevin Warsh who was hired to be what I lovingly named “the cut man.”
If nothing else, he can persuade other voting members to at least stay strong.
The bottom line here is that there will be inflation until the end of the year, and all cuts are officially off the table.
Bond yields should also remain high, and any volatility could send them to new highs in 2026.
We just had the 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.
Payout Rate Chart Shows High Highs
I was looking at a mortgage rate chart from Mortgage News Daily and a pattern emerged.
High altitude. We saw mortgage rates jump in early February when the Iran conflict continued.
Then we saw relief in April with the hope of some kind of quick deal. It didn’t happen.
Just like that, prices rebounded in mid-May after a hotter-than-expected CPI report and reached their highest levels of the year.
Last week provided some relief, but is the next move the highest of the year?
It won’t scare me to be honest. If you look at this chart, you can see pullbacks that last for a while and are followed by new highs.
It probably went over 6.75% this time and went up another eighth of a percent to about 6.875%.
And that may not be all. We may continue to climb higher and rise above 7%, assuming the argument continues.
A recent note from Piper Sandler laid out a scenario where the Strait remains closed for a long time and oil prices have skyrocketed this summer.
It’s not that hard to believe, and if it does, a new high in mortgage rates should not only be a possibility, but an expectation.
Read on: There is only a 50/50 chance that mortgage rates will rise above 6.8% this year?
(photo: FutUndBeidl)
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on X for the hottest.
