Four weeks later: still six things, and what it would take to flatten, or actually bring rates down.

Four weeks ago I laid out six things pushing mortgage rates up at once. Since then three have gotten worse and none have improved, and rates are back at 7%. The VA average is 6.71% (Optimal Blue daily index, September 15), up from 6.35% the day that post went up and 5.53% the last business day before the war. Conventional is 7.05%, a one year high. Freddie Mac's weekly 30 year came in at 6.95%, the fourth straight weekly increase and the largest one week jump in about 16 months. The week before February 28 it was 5.98%.

Bottom line up front. To stop the climb, oil supply needs to stabilize, the Fed's next hike has to be its last, and Washington has to stop surprising the bond market every week. To get a full point back would take all of that plus a ceasefire that holds, oil back down to the 70s, and the Fed actually cutting, probably mid to late 2027 at the earliest. To get two points back would most likely take a recession, which is what a lot of readers said in the comments last time. So for now, even getting rates to level off is going to be a challenge.

Where the six things stand, four weeks later.

1. The war and oil. Worse. Brent went from about $80 to about $105 after drone strikes took Saudi Arabia's East-West pipeline offline, the route the kingdom was using to get around the Strait of Hormuz, and tanker traffic through Hormuz is still a trickle.

2. The Fed. Worse. The Fed raised its rate a quarter point on September 16 to 3.75% to 4.00%, the first hike since 2023, in a unanimous vote, and the committee's projections show one more before the end of the year.

3. The deficit. Worse. The 10 year Treasury touched 5% this week, the highest since 2023.

4. AI borrowing. Unchanged. Tech companies are still issuing record debt for data centers that competes with Treasurys for the same investors.

5. Japan pulling money home. Unchanged. Japanese yields are the highest since the 1990s and the money keeps coming back.

6. Uncertainty. Worse. Investors are charging more to hold long term US debt, and policy by social media post, news soundbite, and a general erosion of confidence is part of why.

What readers said last time, and how it aged. The most common question in the r/Mortgages thread was some version of "when do we get 4.5 back." My answer then was that rates don't fall that far because things are going well. They fall because something breaks, and the last two big rate drops came with 2008 and 2020. Four weeks later nothing about that has changed. Rates would drop with a significant worldwide financial crisis or some other planet altering event. I am not cheering for that one. As much as it would be nice to see 4s again, those don't come without real suffering.

Several people asked whether we're already in a recession if growth is running below inflation. Real GDP already strips out inflation, so the official numbers aren't secretly negative. But GDP per person did go negative earlier this year and the AI buildout is carrying nearly all of the growth that's left. That question got more relevant, not less, now that the Fed is hiking into it.

A few people brought up lock-in. About half of everyone with a mortgage is at or below 4%, and roughly 70% are at or below 5%. That's why very little is for sale. Not nothing, life events still happen and some people are doing fine in this K-shaped economy, which is what's driving the limited buying and selling that does exist. But it's also why a hard rate drop could unlock a wave of inventory that pulls prices down. The Fed knows this. You could also argue current home values are overstated, because when this few houses actually trade, prices are being set by a thin slice of sales rather than a healthy market. That varies by zip code, but the overall average is being held up by low supply in a lot of places. It will be interesting to see what happens as inventory builds if higher rates keep slowing purchases.

What the news misses. The gap between mortgage rates and the 10 year Treasury is roughly 2 points, same as it was in February. Lenders have not gotten greedy. The 10 year went from just under 4% to 5% and mortgages followed it almost exactly. Every one of the six runs through that one number.

What it takes just to stop the climb and sit around 6.75 to 7.

Oil has to stop hitting highs. That takes the Saudi pipeline getting repaired and Hormuz at least partially reopened. The Energy Secretary says days. Most independent analysts say weeks or months.

The Fed's one more hike has to stay at one. A hot October inflation number, which you'd expect with oil where it is, probably gets markets pricing a third hike and keeps the 10 year grinding higher.

Washington has to stop surprising the bond market. This sounds political but it isn't, it cuts across both parties and administrations. The people lending the US government money for the next 10 and 30 years need to believe they know roughly what policy looks like a year from now, five years from now, and right now they don't. When trade policy changes in a social media post, when tariff threats get announced on cable news before the markets or the agencies have seen them, when we pick fights with countries that hold a lot of our debt, investors charge extra for the uncertainty. That extra lands directly in mortgage rates, because mortgage rates follow the 10 year almost exactly. Oil could drop to $80 tomorrow, and if the government keeps governing by soundbite, a good chunk of this increase stays and rates might keep rising anyway.

If all three happen, I think rates level off by year end. Two out of three probably isn't enough. And the midterms this fall probably won't change much in the short term either.

To get a full point back, to around 6. The 10 year has to get back to about 4%. That takes a ceasefire that actually holds, with Saudi and Iranian oil flowing again for at least a month, and oil back to $70 or $80 long enough that gas is cheaper than a year ago. Inflation would actually have to flatten, and the Fed would have to vote to reverse course and cut, with the market believing they'll keep cutting. Warsh has been clear he isn't moving until inflation is clearly headed to 2%.

On top of all of that, the confidence problem has to be repaired, not just paused. The deficit, the AI borrowing, and Japan leaving are all survivable as long as the world still sees Treasurys as the safest boring asset there is. For now, we are still winning the ugly contest. We aren't as attractive as we used to be, but go shop around and it gets hard to find better alternatives. The day that stops being true, none of the oil or Fed math matters.

Realistically, mid to late 2027 if the war ends this fall. I don't think we see February rates again for a long time even in the good case.

To get two points back, to around 5. A 5% mortgage needs a 10 year around 3.3%. The last time we had that was 2020 and the reason was a recession. Given world events and the actual situation on the ground, a very real path from here is oil climbing to $130, the Fed continuing to hike against energy inflation, the economy slowing and cracks appearing over the next three to six months, and then the Fed slashing rates in a panic, usually after the fact, because the cracks are hard to see before they show. Rates would come down alongside layoffs. Nobody should be hoping for this scenario.

General context, not advice. Your situation is your own and this is the backdrop, not a recommendation. That said, here is how the math generally reads. Anyone locked under 6.5 is sitting on a rate the market can't beat right now. Anyone buying now is looking at a market priced around 7, where anything lower is a bonus, and rates probably don't get better before they get worse, though I could be wrong. Anyone waiting for 5 is, in effect, waiting for a recession, and that may change whether they still have a job or still want to take on a house when that rate finally shows up. And same as in February: strong credit, a normal loan size, and three quotes on the same day still tends to land a quarter to half a point under the published average.

Set a Rate Watch at your number and let it tell you when the market gets there. That's what it's for.