What happens to mortgage rates if the Iran conflict is over?

Though there is still a lot of uncertainty, it looks like we could have an actual end to the Iran conflict as tankers are starting to Let’s take our tracker variables and look at what to expect now that the conflict seems imminent.

1. Mortgage spreads should stay at low levels

Mortgage spreads are the Remember, with the 10-year yield at its current lovel:

• If we had the worst mortgage spread levels of 2023, mortgage rates would be 7.86% today, not 6.65%.
• If we had the worst levels of 2024, mortgage rates would be 7.48% today.
• If we had the worst levels of 2025, mortgage rates would be 7.29% today.

Mind that spreads have been the

Mortgage rates between 5.75% and 6.75%

The 10-year yield fluctuating between 3.80% and 4.60%

For the most part, this forecast channel has held even amid the conflict. But earlier this year, before the conflict even started, inflation growth was rising faster than people had hoped. Also, many at the Federal Reserve now believe that the labor data has improved and isn’t getting worse. This is leading to more Fed members As you can see in the chart below, a lot has been priced in due to the conflict, and the growth rate of inflation is still above the Fed’s target and heading higher.

I’ve focused primarily on spreads and the 10-year yield in this article; one will be positive for sure; the other will take more time and critical variables to improve to get back to the pre-conflict era. However, for the most part, the housing market weathered the conflict as well as it could. Anything better on lower yields and good spreads will be a positive in 2026 and a good setup for 2027 as well.