Just days after mortgage rates hit a new 52-week high, bond yields also hit their highest level in more than a year.
The yield on the 10-year bond, which helps pay consumer mortgage rates, rose more than 4.60% late Sunday evening on renewed inflation concerns related to the ongoing conflict in the Middle East.
The longer it continues, the more likely it is that the opening of the Strait of Hormuz will be pushed out.
Meanwhile, oil prices are climbing back to multi-year highs, shifting the likelihood from Fed tapering to Fed rate hikes.
That puts more pressure on the spring home buying season, which looked promising until it started to falter in late February.
Bond Yields Rise to Highest Levels Since Early 2025
The 10-year bond yield is now at a 52-week high (note the little yellow banner from CNBC!), and has not been higher since January 2025.
Meanwhile, the 30-year fixed rate rose to 7.25%, which was enough to calm the housing market and give homebuyers some respite.
At that time, the 10-year yield reached about 4.75%, but because of the wide spread, the loan rates were very high.
The spread between the 30-year and 10-year yields was 250 basis points back then, wide because of concerns about prepayment activity (most rates are expected to fall and refinanced to rise).
It certainly was, and since then the spread has been slow.
At first glance, they are close to 200 bps, so the mortgage rates have improved significantly due to the spread alone.
If we still had a 250-bp spread, the 30-year fixed note would be worth about 7.125% today.
Instead, it is closer to 6.625%, which is one silver lining in the negative situation.
On the other hand, mortgage rates are much higher than at the beginning of March, when they were below 6%.
But they still have a lower fair value than last year, although that gap is starting to close.
More Pressure on Mortgage Rates to Return to the 7% Range
The latest news about mortgage rates is that they could go higher than they already have.
As noted, we are up about 0.625% since early March when the 30 year fixed rate was below 6%.
That’s a great move, even though mortgage rates were at a 3.5-year low at the time.
So they woke up in a very good place.
But any hope of a peace deal in the Middle East seems a long way off, especially since President Trump has been posting some sensational stuff on his Public Truth platform in the past 48 hours.
It’s the same old rhetoric telling Iran to beg for mercy or else, with Trump saying, “The Clock is Ticking on Iran, and they better move, FAST, or there will be nothing left for them.”
Meanwhile, Brent oil prices are back above $110 per barrel and everyone is worried that inflation will rise again.
Bonds don’t like them, so higher yields, which translates into higher loan rates.
How that will change anytime is the big question mark. But the longer this interference goes on, the greater the threat of higher prices and possible price hikes to fight another round of inflation.
Speaking of which, the latest odds from CME FedWatch are now up across the board with a 5.4% chance of a July meeting.
It’s still very low, but the cuts are nowhere to be found and the chances of a ride are up from zero last week.
In other words, the pressure is back on profits and mortgage rates to go up from here, not down.
The nearest win may be to stay at current levels and not go back to the 7% range.
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.
