Mortgage rates break above 7% as Iran
U.S. Mortgage rates ended last week at 7.12%, crossing above the 7% threshold for the first time in 2026. The rise is attributed to a worsening conflict in Iran pushing the 10-year Treasury yield higher, with housing data showing early signs of strain.
Mortgage rates in the United States have moved above 7% for the first time this year, closing last week at 7.12%. According to a HousingWire report, the increase follows a rise in the 10-year Treasury yield, driven by an escalation in the Iran conflict now entering its sixth month.
Historically low mortgage spreads prevented an even steeper climb. The gap between the 10-year yield and mortgage rates is currently the widest the tracker has recorded. If spreads were at their worst levels from recent years, current mortgage rates would be significantly higher.
Comparative rate scenarios
| Scenario (Worst Spread Year) | Potential Mortgage Rate Today |
|---|---|
| 2023 | 8.31% |
| 2024 | 7.94% |
| 2025 | 7.74% |
The report notes that housing demand typically fades when rates rise above 6.64% and move above 7%. The author's 2026 forecast had anticipated mortgage rates between 5.75% and 6.75%, with a top-end possibility of 7.13% to 7.18% if the 10-year yield did not exceed 5%. Last week's close at 7.12% aligns with that pessimistic scenario.
Housing inventory and listings
Weekly housing inventory fell from 883,683 to 873,978 homes between September 4 and September 11, a decline attributed to the Labor Day holiday. In the same week last year, inventory rose from 846,529 to 860,233. The report states that inventory growth in 2026 has been minimal but could gain momentum as rates climb, provided new listings data does not fall more than the trend.
New listings data also showed a seasonal decline to 58,803 last week, down from 64,444 in the same week of 2025. The report calls 2026 the healthiest year for new listings since the 2022 sales crash, though weekly volumes remain far below the 250,000 to 400,000 seen during the housing bubble years.
Sales and price pressure
Pending sales and purchase applications show early softness. Last week's pending sales were 56,255, down from 62,185 a year earlier. The slowdown is linked to rates staying above 6.64% and now exceeding 7%. The report cautions that year-over-year comparisons will be difficult because rates were falling at this time last year, boosting demand.
The price-cut percentage, which reflects the share of homes with a price reduction, was 42.08% last week, nearly identical to the 42% seen a year ago. The author's 2026 home-price forecast calls for a national decline of 0.62%, though most indexes currently show growth between 1% and 2%. With rates rising again, the forecasted decline might yet materialize.
Purchase application data for 2026 shows a mixed picture, with 15 positive weekly prints, 17 negative, and 5 flat. Year-over-year, there have been 25 weeks of positive growth and 7 negative prints. The report says to expect "year-over-year weakness" as comparisons get tougher.
Looking ahead, the bond market and mortgage rates are currently more sensitive to the Iran conflict than to Federal Reserve policy. Markets have already priced in a rate hike. The author stresses that "until this conflict calms down, the Fed will play second fiddle." Retail sales and housing data due this week are not expected to look strong.
