Mortgage rates face several hurdles before they can return to 6%

Mortgage rates are likely to remain above 6% even if geopolitical tensions ease as inflation pressures, Federal Reserve policy and mortgage spreads continue to limit how far rates can fall. That’s according to remarks shared on stage Tuesday by HousingWire Lead Analyst Logan Mohtashami at the American Credit Union Mortgage Association (ACUMA)’s Make Your Mark Conference in Las Vegas. Mohtashami said the recent increases in oil prices and gains for the 10-year Treasury yield have complicated the outlook for mortgage rates. Even if the conflict in the Middle East ends and oil prices fall back toward $68 to $70 a barrel, mortgage rates could remain around 6.5% to 6.75% until the Federal Reserve provides clearer guidance for lowering them. “There’s not a lot of history of mortgage rates going below 5.75% for decades and decades,” Mohtashami said. Spreads have narrowed from prior years Mortgage rates have been affected by a combination of Treasury yields and mortgage spreads, which he said have improved substantially from the elevated levels seen during the 2023 banking crisis. If spreads were still at their worst levels of 2023, mortgage rates would be about 8.36% today, Mohtashami sai...