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 move through the Strait of Hormuz. If we don’t have to worry about oil prices getting much higher for longer, what are the implications for mortgage rates? And what have we learned during this conflict about the housing market and how to look at the future now?
First, we will base everything on the premise I had almost a year ago: the housing market was shifting as of mid-June 2025 as rates were going lower and demand started to pick up. It typically takes other sources six to nine months to catch up to our data lines and you can see how we have explained this trajectory in our weekly Housing Market Tracker articles. Housing demand, even with rates rising from a low of 5.99% to a high of 6.75%, has held up well.
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 hero of the housing market, as they have kept mortgage rates below 6.64% for most of the conflict. If the conflict is truly over and oil flows, one market risk variable is off the table and spreads should stay low.
Both the Godzilla tariffs and the Iran-Israel conflict pushed spreads higher, but only by 0.19%-0.25% basis points. So, the conflict ending is a positive here — as long as the Fed doesn’t guide the market to multiple rate hikes ahead, we shouldn’t see the spreads worsen like we have seen in previous years.
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 biggest variable affecting the housing market since mid-June of 2025.
2. The 10-year yield and mortgage rates might not get back to pre-conflict lows this year
Getting the 10-year yield and mortgage rates to pre-conflict lows will be harder than people think even if this conflict is truly over. As always, I believe in the slow dance between the 10-year yield and 30-year mortgage rates as directionally these two have been connected for decades.
My 2026 forecast range was for:
- 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,