Rising inflation has resulted in elevated mortgage interest rates for borrowers. / Credit: Niphon Phunnu/Getty Images
Inflation is now at its highest point in three years, and that trickles down to everything — from groceries and gas to mortgage rates. The latter has become pretty apparent in recent months, as mortgage rates have quickly climbed from the high 5% range to the 6.62% they sit at today, approximately.
“Mortgage rates have risen sharply since signs of inflation spiked,” says Kevin Watson, home loan specialist and district manager for Churchill Mortgage
Will those rates keep rising, though? And what other impacts could inflation have on borrowers’ pocketbooks? We asked some experts for their predictions on the mortgage interest rate environment now that inflation is consistently rising once again. Below, we’ll break down what they think will happen next.
See which mortgage interest rate you could qualify for here.
What to expect from mortgage rates now that inflation keeps rising
There’s no crystal ball for mortgage rates, but with inflation rising steadily since February and the conditions driving that inflation (the war in Iran, namely), experts say there’s not much of a chance of rates falling anytime soon.
“Homeowners and buyers should reasonably expect mortgage rates to remain in the mid-to-upper 6% range for the balance of the year, with potential for rates to move into the 7% range if the Iran conflict is protracted,” says Jeff Taylor, a board member for the Mortgage Bankers Association and founder of Mphasis Digital Risk. “This conflict has caused inflation, which causes investors to sell mortgage bonds, which pushes rates higher.”
That impact on bonds is the big kicker. Bonds — specifically mortgage-backed securities and 10-year Treasuries — are a huge influencer on mortgage rates. When yields on bonds fall, mortgage rates typically fall, too. When yields rise, though (which would happen in a big sell-off like Taylor mentions), they make mortgages more expensive.
“Rising inflation is usually bad news for mortgage rates in the short term,” says Brian Shahwan, vice president and mortgage banker at William Raveis Mortgage. “Higher inflation equals higher bond yields which in turn equal higher mortgage rates.”
Federal Reserve policy also plays into mortgage rates, and while the central bank cut rates three times last year, it has yet to reduce them at all in 2026. Forecasts from the CME Group’s FedWatch tool show that a cut at any point this year is becoming increasingly unlikely.
In fact, a rate hike is actually more probable, some pros say.
“The probability of a Fed rate hike by year-end has climbed to 50%,” says Nicole Rueth, senior vice president at CrossCountry Mortgage. “There are no rate cuts currently on the board.”
Consider the benefits of a mortgage interest rate lock before rates rise again.
Housing affordability will be impacted, too
With higher inflation comes higher mortgage rates, and that means higher monthly payments. But inflation has other impacts, too.
For one, it increases home prices (particularly on new builds that have to deal with higher material and transport prices). It can also make home insurance more expensive, as well as reduce the budgets that buyers have to work with overall.
“Higher inflation could eat into homebuying budgets,” Shahwan says. “As borrowing costs rise, buyers could qualify for smaller loans or have to stretch their budgets further to cover interest, taxes, insurance, and other housing expenses that also tend to climb during inflationary periods.”
It also reduces how far a down payment goes, and coupled with falling wages, can have an outsized impact on borrowers in lower-income brackets.
“Inflation is eroding the purchasing power of buyers’ savings, and the down payment they’ve been building feels smaller against a world where everything costs more,” Rueth says. “Also, for the first time in three years, real wages just went negative, meaning inflation is now growing faster than wages. That squeeze is most acutely felt by first-time buyers and lower-to-middle income households who were already stretching to get into this market.”
There may be an end (or at least a ceiling) in sight
Fortunately, experts don’t expect rates to climb forever or to any huge heights. For one, the biggest driver of inflation and high rates right now is the conflict in Iran. So once that’s resolved, things should start to come down.
“In time, the war will end and oil prices will settle down as shipping disruptions fade and the bond market regains confidence that inflation will subside. At that time, bond yields and mortgage rates will decline as well,” Watson says. “But if the war isn’t over by the end of the year, I can see the 30-year mortgage rates in the low 7% range.”
A new Federal Reserve chairman — Kevin Warsh — is another guardrail.
“A protracted Iran conflict could cause rates to move into the 7% range, but a new Fed chair who’s closely aligned with White House goals to lower rates may be able to hold rates below 7% with a dovish pause rate stance,” Taylor says.
The bottom line
Mortgage rates might be staying high this year, but that doesn’t mean homebuyers and borrowers are going to be stuck with payments they can’t afford. There are still ways to snag lower interest rates with a little extra effort.
“Adjustable-rate mortgage products, relationship pricing, first-time buyer programs, and free rate float-downs are just some of the ways buyers in today’s market can keep monthlies as low as possible,” Shahwan says.
You can also shop around for your mortgage lender, use a mortgage broker, buy discount points, or use a mortgage buydown program. All of these can help you minimize the impact of today’s higher rates and payments.
