Mortgage rates by one measure climbed past 7% for the first time since early 2025. They could move up another percentage point or two if everything goes sideways.

Freddie Mac's weekly survey of fixed 30-year mortgage rates rose to 7.03% this week-the highest level since January 2025-after the 10-year Treasury yield surged to its highest point in nearly two decades.

They could go a whole lot higher, economists told Barron's. "There's no cap; there's no such thing as a limit," says Mark Zandi, the chief economist at Moody's Analytics.

Don't expect that double-digit mortgages will rear their heads again, like when they rose as high as 18.6% in 1981-Zandi says-but there's room for mortgage rates, which are tied to bond yields, to rise more. "There's no reason to think that the rout [in bonds] couldn't continue, and rates get closer to eight percent, or even higher," he says.

Whether that happens depends on the course of the war in Iran, bond market supply and demand, and investors' perception of the U.S. as a safe haven.

Fixed 30-year mortgage rates are tied to the 10-year Treasury yield. The spread in between the two varies-more on that later-but generally, where the 10-year Treasury yield goes, so do mortgage rates.

In a worst case scenario, the 10-year Treasury yield could rise to 6% or 7%, says Cotality chief economist Selma Hepp. Slap on the recent two-percentage-point spread between the 10-year Treasury and 30-year mortgage rate, and home-buyers would be looking at, as Hepp says, at 8% or 9% mortgages.

One or two percentage points might not sound like much, but on a $400,000 home loan, a gain to 8% from 7% would add a little under $300 a month to a buyer's monthly payment. A would-be buyer with a pandemic-era mortgage at 3% would pay more than $1,500 extra a month to move, holding all else equal.

A whole lot would have to go wrong for mortgage rates to climb that high, Hepp cautions. There would need to be a "significant deterioration" in the dollar as a safe haven currency. Investors would have to flee Treasuries, sending prices down and yields up. And a government shutdown during which a debt-limit standoff triggers a technical default wouldn't help.

More likely: rates remain around 7%, with fluctuations from that level being mostly temporary, she says.

If there's one bright side for home buyers, it's this: mortgage rates would be a whole lot higher if the spread between the 10-year Treasury yield and mortgage rates hadn't narrowed significantly.

The spread between the two stands at around two percentage points. When mortgage rates measured by Freddie Mac scraped 7.79% in late 2023-then the highest such rate since the year 2000 when the spread was around three percentage points.

"Part of that was market volatility," notes Jeana Curro, BofA Securities' Head of Agency MBS Research. Both lenders and investors demand more interest when mortgages rates swing because of the expectation that volume will go down, she said.

The narrowed spread since then is one reason why 3o-year fixed rates are only now at their highest level since early 2025, as opposed to the nearly two-decade highs in the 10-year Treasury yield.

Still, for plenty of home buyers, the difference between the prior week's 6.95% and this week's rate above 7% is wider than the numbers alone would imply.

"The 7% threshold is a foreboding psychological barrier," Lisa Sturtevant, the chief economist at the home listings data company Bright MLS, said in a statement. "Crossing this mark could create a chilling effect on the market, leading to home sales transactions to slow considerably this fall."

For home buyers and investors alike, the question remains where rates are in the spring, which typically kickstarts the busy season for home-buying. The war in Iran will be the wild card, says Zandi, who says mortgage rates in an economy with full employment and inflation in target should be just over 6%.

"The gravitational pull will drag it back to 6% ultimately," he adds, "That's not by the end of the year-but if you look out into 2027, 2028, that's where we should be headed."