US mortgage rates climb to 7.43% amid geopolitical tensions and hawkish Fed

Key facts

• Mortgage rates reached 7.43% last week, driven by geopolitical tensions and hawkish Fed commentary.
• The 10-year Treasury yield is a key level to watch, with 5.40% potentially leading to 8% mortgage rates.
• Mortgage spreads have remained relatively calm, preventing rates from reaching higher levels.
• Housing inventory saw a mild week-over-week increase.
• New listings are in a typical seasonal decline.
• The percentage of homes with price reductions has increased as rates rise.

US mortgage rates experienced significant volatility last week, climbing to a high of 7.49% before settling at 7.43%. This surge was attributed to a confluence of factors including escalating geopolitical conflict headlines, particularly involving Iran and the Houthis, and hawkish statements from Federal Reserve officials. The 10-year Treasury yield, a key benchmark for mortgage rates, has shown a closer correlation with oil prices amid these tensions.

The author's earlier forecast anticipated mortgage rates between 5.75% and 6.75% and a 10-year yield between 3.80% and 4.60%. The current environment, however, has pushed yields higher. A critical level to watch is the 10-year yield at 5.40%, which could pave the way for mortgage rates to reach 8% if geopolitical tensions continue to escalate.

Despite the rising rates, mortgage spreads have remained relatively stable, preventing rates from climbing even higher. Historically, mortgage spreads range from 1.60% to 1.80%, and last week they were at 1.98%. If these spreads were to worsen significantly, it would pose a major negative development for the housing market.

Housing inventory saw a modest increase week-over-week, rising from 890,303 to 895,398. However, year-over-year comparisons are becoming easier to show growth as rates were significantly lower last year, leading to higher demand. New listings are following their typical seasonal decline, with 66,907 recorded in 2026, compared to 65,077 in 2025. Concerns exist that sellers may hold back from listing properties due to the current conflict and rate environment.

The percentage of homes experiencing price reductions has risen to 42.50% in 2026, up from 41.5% in 2025, reflecting increased pricing pressure as rates climb. Weekly pending home sales decreased to 59,316 in 2026 from 65,152 in 2025, indicating a softening demand. Purchase applications also showed year-over-year weakness, down 11%, though only down 1% week-to-week.