Are 7% mortgage rates next? The Treasury market is flashing a warning sign for home buyers.

By Aarthi Swaminathan

The 30-year fixed-rate mortgage edged up to its highest level of 2026

Every percentage-point increase in mortgage rates means thousands of dollars in extra costs to the loan borrower over the life of the loan.

Mortgage rates jumped to a new high for the year, putting another hurdle in front of house hunters eager to buy.

Now the question is whether the 30-year fixed-rate mortgage rate will go back up to 7%.

"It's hard to rule anything out," Orphe Divounguy, a senior economist at real-estate platform Zillow (Z) (ZG), told MarketWatch.

Mortgage rates jumped 8 basis points to an average of 6.85% on Thursday, according to data from Mortgage News Daily. That's the highest level for the 30-year mortgage rate since mid-July of 2025. The 30-year rate moved up 22 basis points between Monday and Thursday.

Separate data from Freddie Mac (FMCC) showed the 30-year mortgage rate rising to an average of 6.58% as of July 23, the highest level of 2026. The 30-year mortgage was last at this level in August 2025, according to Freddie Mac's data.

Freddie Mac calculates the average rate from the thousands of loan applications submitted to them, while Mortgage News Daily data surveys mortgage lenders.

Mortgage rates are sensitive to political developments and economic trends. The 30-year mortgage rate typically rises and falls in tandem with the 10-year Treasury yield BX:TMUBMUSD10Y.

Rising tensions between the U.S. and Iran have pushed up energy prices (CL00) (BRN00), sparking concerns about inflation and the future direction of the Federal Reserve's monetary policy. That has translated into higher Treasury yields and mortgage rates.

Rising Treasury yields put 7% mortgage rates back on the table - but it's not guaranteed.

The last time the 30-year mortgage rate topped 7% was in January 2025, according to Freddie Mac data. At the time, the 10-year Treasury yield was near 4.6%. The 10-year Treasury yield surpassed 4.7% on Thursday morning.

Does that mean that 7% mortgage rates are imminent? Not quite, economists said.

"The spread between [Treasury yields and mortgage rates] has shrunk since then, as rates have been more stable," Joel Berner, a senior economist at Realtor.com, told MarketWatch. But "if the 10-year Treasury yield approaches 5%, then 7% 30-year fixed mortgage rates are certainly in play," he added.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

While it is "possible" that higher Treasury yields could translate into 7% mortgage rates, it is also "not likely," Lisa Sturtevant, chief economist at Bright MLS, told MarketWatch.

"There seems to be a ceiling on mortgage rates, even in this volatile environment, because transactions remain low and mortgage originators must price loans competitively to attract borrowers," she said.

Higher mortgage rates will nevertheless squeeze the housing market.

"If the pressure on oil prices remains, mortgage rates for the rest of the year could be higher than last year's level," Divounguy said. "Unfortunately, that would depress housing activity relative to what we saw last summer and fall."

Plus, "it's not just about rates for homebuyers, but rather the full financial picture of buying," Sturtevant added.

"Home prices hit record highs this summer in many markets across the U.S., while higher gas prices and concerns about overall inflation rising have created more financial strain for would-be buyers," she said.

The median price for a previously owned home in the U.S. hit a record high of $440,600 in June, according to the National Association of Realtors.

-Aarthi Swaminathan

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