I always warn people that mortgage rates are going up, maybe back in the 7% range.
And the main reason is that the war in the Middle East is taking longer than expected.
That would lead to even higher oil prices, which have already increased fuel prices and now affect input costs for almost all products/services.
But now we have another issue; Hot labor data is also becoming a thing again, with the latest ADP jobs report coming in above forecast.
And the BLS jobs report for May is out this Friday, which could lead to increased pressure on mortgages.
The One-Two Punch of Mortgage Rates
It seems whenever mortgage rates win, they face a reversal. It’s been a long time victory entering 2026 and reached low levels from mid-2022 to the end of February.
Then just like that, the Middle East conflict pushed 30-year fixed rates back to 6.50% and higher.
Not only is this bad news for those looking to refinance their mortgage, it also comes during the first home buying season.
So far this year, mortgage rates have risen about 6.75% due to rising oil prices and fears of another wave of inflation.
But they settled down a few weeks ago in hopes of finding a solution.
Now there are renewed fears that they could rise again because of new tensions in the war between Iran and the US and its allies.
Add to that labor data that has been warming with the weather.
We’ve had quite a few jobs events recently, including today’s ADP jobs report, which is the best since early 2025.
That piles more pressure on bond maturities, driving up mortgage rates.
This Friday we get the even more important BLS jobs report for the month of May. If it also comes in hot, mortgage rates could retest recent highs.
Peace in the Middle East Most Important to Real Estate Ratings
Despite mortgage rates now facing two separate problems, an incredibly hot economy and an unexpected war, a final settlement may be enough to right the ship.
I have already said that the conflict was a very difficult and specific problem in terms of housing costs.
They are the highest tody because of the war, not for any other reason.
Yes, the labor force has been hotter than expected recently, but not in a way that puts mortgage rates at greater risk.
Simply put, the labor market has shown some resilience and is not putting downward pressure on interest rates due to weakness.
So that goes the war again as the main driver. This is where you should focus when it comes to mortgage rates.
If the peace negotiators can do something there, the loan rates may be able to go back to 6% instead of above 6.50%.
And now it is well known that home buyer activity increases when rates are on the low side of 6.50%.
But if we think they’re heading higher because of a prolonged contraction, fueled by tepid jobs data, we could see housing sales pick up again.
There have already been warnings of $150 per barrel oil, which if true, could send loan rates back to 7% or more.
(Photo: Marcin Wichary)
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.
