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Cotality's chief economist puts a 9% mortgage rate in a severe scenario and about 7% in the base case

TC Bulletin found no published forecast of a 10% mortgage rate. At the spread rates now carry over Treasuries, 10% would need a 10-year yield near 8%, against 5.22% on 8 October. The payment arithmetic shows how far prices would have to fall to hold volume at those rates.

TC Bulletin Staff9 min readRead as markdown

What this story establishes

  • Cotality chief economist Selma Hepp said on CNBC, as Yahoo Finance reported on 2 October 2026, that a 9% mortgage rate is possible only in a severe scenario. The base case is rates near 7% for a little while.
  • The severe scenario combines Treasury yields rising toward 6% to 7% with a mortgage spread near 2 points, driven by a debt-limit standoff, a shock to confidence in the Treasury market and a weaker dollar as a safe haven.
  • TC Bulletin searched for a published forecast of 10% and found none. Other forecasts it found run from Zillow's 6.7% by the end of 2026 to Realtor.com's Jake Krimmel saying rates are 'far more likely to go up than down' by the end of the year.
  • On a $343,280 loan, principal and interest is $2,377 a month at 7.40%, $2,762 at 9% and $3,013 at 10%. To hold the 7.40% payment, the price would have to be $369,242 at 9% (13.9% lower) or $338,548 at 10% (21.1% lower).
  • Prices have not fallen so far. NAR's median rose 1.6% in August, its 38th straight annual gain, while sales fell 1.2% from a year earlier. Krimmel said more than one in five listings carried a price cut in August.

Cotality's chief economist Selma Hepp told CNBC's Squawk on the Street that a 9% mortgage rate would require a severe combination of events, and that it is not the base case. Yahoo Finance reported the interview on 2 October 2026, when Mortgage News Daily had the 30-year rate at 7.5% as of the prior Tuesday.

What the forecasts say

Hepp's base case is that rates stay near 7% for a little while. Hepp's 9% figure depends on Treasury yields rising toward 6% to 7% for a temporary spike while the mortgage spread stays near 200 basis points, which is 2 points. The disruptions she named are a debt-limit standoff, a more serious shock to confidence in the Treasury market, and further weakening of the dollar's safe-haven status.

What 9% and 10% would require

A mortgage rate is the 10-year yield plus a spread, and TC Bulletin's explainer on that relationship sets the current spread at about 2 points. On that spread, 9% needs a 10-year yield near 7%, which matches the range Hepp gave. A 10% rate needs a yield near 8%. The yield was 5.22% on 8 October, according to the Federal Reserve's H.15 release. A wider spread would lower the yield needed, and the spread was above 3 points in 2022 and 2023, per Wolf Street's analysis. This is TC Bulletin's arithmetic and not anyone's forecast.

What the payment arithmetic says about volume

The table holds NAR's August median price of $429,100, a 20% down payment and a 30-year fixed loan constant, and counts principal and interest only. The second column asks the reverse question: at each rate, what price gives the same monthly payment a buyer would have faced at 7.40%.

A buyer working to a fixed monthly payment has three ways to absorb a higher rate: pay less for the house, earn more, or not buy. Wages grew 3.1% in August, per Yun, which is a small fraction of a 16% or 27% payment increase. If sellers do not cut prices, the arithmetic leaves the third option, and the volume that goes missing is contracts.

The current data show that pattern at today's rates. NAR's August median price was up 1.6% on a year earlier while sales were down 1.2%. Realtor.com's Krimmel said more than one in five listings had a price cut in August, so some sellers are adjusting, and Yun said the larger inventory gives buyers better opportunities to negotiate. Hepp said many existing owners are reluctant to move because their current loans are valuable to keep, and that builders are using rate buy-downs and seller concessions. Owners who will not list and sellers who will not cut are why prices can hold while volume falls.

What a coordinator can track

  • The 10-year yield and the Freddie Mac weekly rate, to see which scenario the market is closer to. Hepp's base case needs yields to stop rising.
  • NAR's pending index by region. August's 4.7% annual decline was 6.7% in the West and 3.8% in the South.
  • The share of listings with a price cut, published by Realtor.com, as the sign that sellers are adjusting.
  • Months of supply and median days on market in NAR's monthly report: 4.9 months and 31 days in August.