Mortgage Rates Predicted To Rise Before Settling Back to 6.5% Next Year

Rising rates are weighing on the housing market, and the uncomfortable levels above 6% might be here for the medium term, capital markets firm Optimal Blue estimated in its latest report.The 30-year fixed-rate mortgage has been on a steady upward march for six weeks—hitting 6.69% last week, up from 6.43% July 2. That's the highest it's been since July 2025, according to Freddie Mac.Optimal Blue expects it to reach 6.76% in three months, then moderate slowly to 6.58% in 12 months.Slowing inflation is a hopeful sign for mortgage rates. Once mortgage rates do go down, some cities may see a boom in home sales. But until then, the market is in a holding pattern of slower sales. And home sales are continuing to slow this year.Optimal Blue expects rate sensitivity to continue weighing on borrower demand. The company says purchase volume declined 12% in July, as mortgage rates rose 26 basis points. And purchase pull-through, or the share of mortgage applications that made it to closing, fell 2.4 points to 78.9%.“July was a clear reminder of how sensitive this market remains to rate movement,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “A 26-basis-point ra...