Will mortgage rates finally get over 7% this week? Not that long ago, I wrote about why it would be hard to get rates over 7% in 2026. However, today, mortgage rates hit yearly highs on Monday as we saw more more escalation in the Iran conflict over the weekend, with the U.S. and Iran sending missiles flying again and even President Trump posting an AI slop video of blowing up Kharg Island.
In any case, the news sent oil prices higher and mortgage rates to yearly highs. In today’s episode of the HousingWire Daily podcast, which was done last Friday, Editor in Chief Sarah Wheeler and I focused on the mortgage rate outlook and what matters and what doesn’t as much. To add even more more drama to this week, it’s jobs week! So, can rates finally break over 7% for the first time this year?
Mortgage spreads can only do so much
It isn’t a shock to me that mortgage rates haven’t yet gotten over 7% this year. Where mortgage spreads are at, a lot needs to happen for rates to get above 7%, something very common in previous years. However, we haven’t seen that yet, not even today, as rates are at 6.87%.
The 3 factors that could raise rates over 7% are in play this week
1. The Iran conflict gets worse.
This happened over the weekend, and even though oil prices aren’t over $100, the duration of this conflict, lasting six months now, has been an issue for the Federal Reserve, and the weekend actions made it worse in the eyes of the market.
2. The trade war picks up steam.
It’s probably not the best time in the world to restart the trade war with Canada right now, but it is in play, and Trump is even asking Canadian companies to move to the U.S. so they have no tariffs. In any case, the Fed doesn’t like tariffs, which means the bond market doesn’t like tariffs.
3. Jobs stay stable, and the unemployment rate stays low.
A big reason why the Fed hawks are feisty this year is that the labor market has stabilized, jobless claims are low and the unemployment rate is at 4.1%. So, if the labor data beats estimates and wage growth picks up instead of falling, that means all three big key variables are in play to push yields higher. Since it’s jobs week, we will have four key labor data reports to focus on, and Jobs Friday is the big one.
Conclusion
It’s been a crazy start to the week and all three variables that could possibly push mortgage rates above 7% are in play over the next few days. I still think the Iran conflict is the big focus of the bond market over the last few months, so on one hand, President Trump can’t call for lower rates while continuing this conflict — it simply doesn’t work that way no matter who he puts as Fed Chair. The Canadian news wasn’t the best, but for now I doubt they will follow through with the tariffs in 2026. Still, the Fed doesn’t like this trade war and that affects rates.
Finally, it’s jobs week, so we will get data on job openings, the ADP jobs report, jobless claims and the big one — Jobs Friday. That report will be a big factor in whether the Fed hawks can convince four more Fed members to vote with them for a rate hike at the September meeting.
