Can the Government Actually Lower Mortgage Rates? Here's What's Really Standing in the Way

Mortgage rates are still hovering near their yearly highs, and the Trump administration has been pulling every lever it can find to change that. So far, none of it has worked. According to HousingWire analyst Logan Mohtashami, the real obstacle isn't a lack of effort from Washington. It's an unresolved conflict overseas that keeps sending bond yields higher every time it flares up.

Here is what the government has tried, why it hasn't moved the needle yet, and what the latest housing data says about a market that is cooling off slowly rather than falling off a cliff.

What Has the Government Already Tried?

Treasury Secretary Scott Bessent made a major move on Aug. 19, announcing a larger debt buyback plan for longer-term debt, set to begin Sept. 9. Per HousingWire, Mohtashami describes this as "a more defensive play" aimed at calming the long end of the bond market rather than forcing yields sharply lower.

That followed an earlier attempt to intervene in currency markets, using euros, not dollars, to buy yen. The U.S. Treasury still has other tools available. It can issue more short-term debt, avoid long-term issuance, and attempt a form of yield curve control if conditions worsen. As HousingWire notes, none of it has been enough so far. The bond market "isn't budging," and mortgage rates remain close to their highs for the year.

The timing hasn't helped. The one-day bond rally that followed the Bessent announcement evaporated within 24 hours. Then, over the weekend, trade talks with Canada collapsed, prompting the United States to impose 50% tariffs on Canadian goods, with Canada preparing to retaliate.

The Real Reason Rates Won't Come Down

According to HousingWire, the biggest factor keeping rates elevated isn't tariffs, Treasury maneuvering, or even Fed policy. It's the ongoing conflict involving Iran. Mohtashami points out that bond yields consistently rise, often sharply, whenever there is escalation or bad news tied to the conflict. The one notable exception came when oil tankers were able to move freely through the Strait of Hormuz, which briefly pushed yields lower.

The Federal Reserve isn't a fan of this dynamic either. HousingWire reports that some Fed members have pointed to the supply-shock risk from the conflict as justification for wanting to raise rates rather than cut them.

Six months into the conflict, the U.S. is now moving toward heavier economic sanctions on Iran. As Mohtashami puts it in his HousingWire analysis, "If we want lower yields, we know what to do."

10-Year Yield and Mortgage Rate Forecast

In the 2026 HousingWire forecast, Mohtashami projected mortgage rates would trade between 5.75% and 6.75%, with the 10-year yield ranging from 3.80% to 4.60%. The Fed's hawkish tone, combined with growing concern over the AI boom's impact on the economy, has kept yields toward the higher end of that range. The only sustained drop in yields this year came during a brief period when a deal with Iran allowed oil tankers to move again.

Mortgage Spreads Are Doing the Heavy Lifting

Despite everything going on, mortgage rates still haven't broken above 7% in 2026. HousingWire credits this almost entirely to mortgage spreads, the gap between the 10-year Treasury yield and the average mortgage rate, which have stayed closer to historically normal levels.

Historically, spreads have ranged between 1.60% and 1.80%. Last week, spreads sat at 1.96%, down slightly from 1.99% the week before. That's still wide by historical standards, but it's working in borrowers' favor. Diesel prices have jumped again amid the conflict, but with WTI crude holding below $100 a barrel, the spread has enough room to absorb some of the pressure.

To put that in perspective, HousingWire ran the numbers on what today's mortgage rate would look like under worse spread conditions:

• At 2023's worst spread levels, mortgage rates would be 7.92% today instead of 6.77%.
• At 2024's worst spread levels, rates would be 7.54%.
• At 2025's worst spread levels, rates would be 7.35%.

For rates to break above 7%, the Iran conflict would need to worsen further, pushing oil and diesel prices higher for a sustained period.

What the Latest Housing Data Shows

Mortgage rates have spent more time above Mohtashami's key level of 6.64% recently, and according to HousingWire, the effects are starting to show up across several housing metrics, though none of them point to a sharp downturn.

Pending Home Sales

Weekly pending home sales data, which HousingWire notes typically takes 30 to 60 days to show up in official sales figures, came in modestly lower than a year ago:

• 2026: 66,177
• 2025: 67,173

Purchase Applications

Purchase application data, which looks out 30 to 90 days, has softened since rates climbed above 6.64%. Applications rose 2% week over week but were down 3% year over year. Per HousingWire's 2026 tracking so far:

• 13 positive week-to-week prints
• 17 negative week-to-week prints
• 2 flat week-to-week prints
• 10 weeks of double-digit year-over-year growth
• 25 weeks of positive year-over-year growth
• 6 negative year-over-year prints

Housing Inventory

Inventory growth has picked up slightly as rates have stayed elevated. HousingWire reports year-over-year inventory growth now sits at 1.57%:

• Aug. 14 – Aug. 21, 2026: Inventory rose from 871,063 to 874,784
• Aug. 15 – Aug. 22, 2025: Inventory rose from 860,055 to 861,226

New Listings

New listings remain in their typical seasonal decline, but HousingWire calls 2026 the best year for new listings since rates first rose in 2022, even though volume is still well below pre-2022 norms:

• 2026: 68,440
• 2025: 66,818

For context, normal weekly new listings during peak season typically range from 80,000 to 100,000. During the housing bubble years, weekly new listings ranged from 250,000 to 400,000.

Price Cuts

About one-third of homes typically see a price reduction before they sell. HousingWire notes that price-cut percentages have run lower than last year throughout 2026, though that gap is narrowing as rates rise:

• 2026: 41.97%
• 2025: 42%

Mohtashami's 2026 forecast called for a national home-price decline of 0.62% for the year. With most home price indexes currently showing growth between 1% and 2%, he acknowledges in his HousingWire column that hitting that target is a stretch, though renewed rate pressure could still bring prices closer to flat by year-end.

The government has real tools to influence mortgage rates, from Treasury buybacks to currency intervention to short-term debt strategy. But as HousingWire's Logan Mohtashami explains, none of those tools can outweigh the pressure coming from an unresolved geopolitical conflict. Until there's real progress on Iran, expect mortgage rates to stay range-bound, with mortgage spreads doing most of the work to keep them under 7%.

Mortgage rate forecasts and market conditions can shift quickly. Talk with a loan officer about how current rates and spreads affect your specific homebuying or refinancing timeline.