Mortgage Rates Stay Below 7% as Iran-Linked Inflation Risk Keeps Yields Elevated

What happened

Mortgage rates remained below 7% in the latest week despite elevated longer-term Treasury yields, according to HousingWire’s weekly market review. The report puts the mortgage rate at 6.77% and attributes the restraint in part to mortgage spreads—the gap between mortgage rates and the 10-year Treasury yield—rather than to a broad easing in bond-market conditions.

The article said the Treasury announced a larger debt-buyback plan on Aug. 19, scheduled to begin Sept. 9. Bond yields fell for one day following that announcement, then reversed the next day, according to the report. It also said U.S.-Canada trade talks broke down Friday night, after which the U.S. imposed 50% tariffs on Canadian goods and Canada was set to retaliate.

The key details

HousingWire identifies inflation risk related to the Iran conflict as the primary influence on the long end of the bond market. The article says yields have tended to rise sharply when the conflict escalates or when adverse news emerges. It points to a recent period in which yields moved lower when oil tankers could move through the Strait of Hormuz and there was briefly a deal with Iran. The report also says some Federal Reserve members have cited the supply-shock conflict in supporting rate increases.

The article argues that the Treasury has potential tools affecting debt issuance and the yield curve, including issuing more short-term debt, avoiding long-term issuance and, if needed, attempting yield-curve control. But it characterizes the government’s recent measures as not yet producing a lasting decline in yields.

Mortgage spreads were 1.96 percentage points last week, down from 1.99 points the prior week. HousingWire says historical spreads have generally ranged from 1.60 to 1.80 points. At the current 10-year yield, the article estimates mortgage rates would have been 7.92% under the worst 2023 spread levels, 7.54% under the worst 2024 levels and 7.35% under the worst 2025 levels.

Why it matters

The report uses 6.64% as a reference level above which housing demand has softened in recent years. With mortgage rates above that level, it says a slowdown in sales is becoming more apparent, although it has not been large. Purchase applications increased 2% week over week but declined 3% from a year earlier. The data cited for 2026 include 25 weeks of year-over-year application growth and six weeks of year-over-year declines.

Inventory increased from 871,063 to 874,784 during the week from Aug. 14 through Aug. 21. In the comparable week a year earlier, inventory rose from 860,055 to 861,226. The article puts year-over-year inventory growth at 1.57% and says new listings are in their customary seasonal decline.

HousingWire says the share of homes receiving price cuts has generally been lower this year than last year, but that difference has narrowed as mortgage rates have risen. It also says most home-price indexes cited in the article show annual growth of roughly 1% to 2%.

What to watch

The coming week includes releases on new-home sales, home prices, GDP and inflation, as well as bond auctions and Federal Reserve speeches. HousingWire is watching how the 10-year yield responds to developments involving Iran and Canada, assuming there is no additional trade-war news involving Canada.

The report says a worsening Iran conflict that sends oil and diesel prices higher for longer could add upward pressure on mortgage rates. It also argues that ending the conflict and new trade disputes could create conditions for a more sustained decline in yields, while not presenting that outcome as certain.