Treasury yields hit 2026 peak, but spreads keep mortgage rates below 7%

Rising mortgage rates have impacted the summer homebuying season and have been cited by at least one major lender as a key reason for recent layoffs. But the market got a brief respite this week as rates cooled slightly.

On Tuesday, HousingWire‘s Mortgage Rates Center showed that rates for 30-year conforming loans averaged 6.92%, down 2 basis points from one week ago. Rates for 30-year loans through the Federal Housing Administration (FHA) were also down 2 bps to 6.61%, while rates for 30-year jumbo loans rose 1 bps to 6.95%.

Rates have been rising consistently over the past month due to high oil prices tied to the conflict in the Middle East, and the 10-year Treasury yield — which mortgage rates tend to move in tandem with — has reached a 2026 peak of 4.75%. But HousingWire Lead Analyst Logan Mohtashami wrote over the weekend that while mortgage spreads have reached 2% — higher than their historical average of 1.6% to 1.8% — they remain low enough to keep mortgage rates from being much higher.

The worst mortgage spreads levels of 2023 today would mean rates of 7.98%, while the worst levels of 2024 and 2025 would equate to rates of 7.60% and 7.41%, respectively, he pointed out.

“The other variable that has helped housing this year is that, in the past two years, wages have outpaced home-price growth,” Mohtashami wrote. “Even though national nominal home prices haven’t fallen, they’re not growing much: 1%-2% last year and the same this year. Parts of the country are up more than that, and parts are down. However, this has helped with housing affordability.

“Just imagine if home prices had grown 3% in 2020 and 2021 instead of 10% and 19%; we would have had better affordability. If home prices were growing faster than wage growth, I wouldn’t be able to say that the market is healthier.”

But mortgage demand took a tumble last week as application activity dropped 6.4%, led by a 10% decline in refinances.

“Mortgage rates climbed to their highest level in nearly a year last week, continuing to weigh on both refinance and purchase activity. While incoming economic data will continue to shape the outlook for interest rates, elevated borrowing costs remain a challenge this summer for many prospective homebuyers,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA).

Mat Ishbia on the Fed, home sales and regulatory efforts

In his monthly “3 Points” video that was posted to YouTube earlier this week, Mat Ishbia, president and CEO of United Wholesale Mortgage (UWM), focused on Federal Reserve Chair Kevin Warsh‘s mission to drive down mortgage rates.

Last week, the Fed kept rates unchanged for a fifth straight meeting. Going into the week, investors and interest rate traders had placed relatively high odds on a 25-bps hike, which would’ve been the first time the central bank raised rates since July 2023.

Market watchers continue to have mixed feelings about the Fed’s next move, especially because of Warsh’s decision to remove forward guidance from Fed statements. After last week’s decision to hold the federal funds rate at a range of 3.5% of 3.75%, Warsh said he believed that the markets “are learning to play the ball, not the referee.”

The CME Group‘s FedWatch tool on Tuesday showed that interest rate traders are split about what will happen at the Fed’s mid-September meeting, with 41% calling for another rate pause and 59% anticipating a 25-bps increase.

“While President Trump has pushed for lower rates, Warsh indicated that mortgage rates will likely improve through broader monetary policy rather than immediate Fed fund rate cuts,” Ishbia said. “… Warsh says he thinks that the overall economic policies will help drive rates down, whether it’s by the end of this year or early into next year, so we’re all watching closely and hoping that will help borrowers looking to buy and even refinance their homes.”

Ishbia also touched on the Trump administration’s pursuit of a “broad regulatory agenda that could significantly reshape the U.S. mortgage market across several federal agencies.” This includes simplified rules and lower regulatory hurdles at the Consumer Financial Protection Bureau (CFPB), the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA) and the Federal Housing Finance Agency (FHFA).

“I’m not getting into each specific rule change or idea, whether it’s servicing related or policy related. But the key is they’re looking to make things better,” Ishbia said. “Now, how much of this will [they] implement soon and affect mortgages you’re doing this year? Probably none of it.”

Lastly, Ishbia pointed to new home sales, which rose by a modest 1.6% from May to June while remaining down 5.5% year over year. He called the 2026 summer purchase market “really good” despite higher interest rates and affordability hurdles. HousingWire Data reinforces his observations as weekly pending home sales and total pending sales (a moving average) are up from this time in 2025.

“People think it’s slower out there. It’s actually not slower; it’s actually pretty busy across the board,” Ishbia said. “Housing is going strong, and homes are selling right now in this environment. Now, when rates drop even further, we see it kicking up even higher.”