Goldman Sachs is changing its forecast on mortgage rates.

In January, the firm’s housing economists predicted mortgage rates would land at 6.5% by the end of this year. Now? Well, never mind. Goldman Sachs believes rates will run higher.

“We are revising our forecasts for mortgage rates higher, to 7.1% for year-end 2023 and 6.8% for year-end 2024 from prior forecasts of 6.6% and 5.9%, respectively,” Roger Ashworth, managing director at Goldman Sachs, wrote in a note for the firm's housing team.

Why the change? Goldman's revised forecast largely reflects that the Federal Reserve indicated last month that it won’t be cutting any time soon. In fact, its benchmark interest rate will likely be higher for longer with another potential hike in store this year as the Fed continues to fret about inflation.

Fixed-rate mortgages are tied to the 10-year Treasury yield, which has been surging for weeks and got an extra boost Tuesday following jobs data. Yields, which move in the counter direction of bond prices, have been on the march as investors increasingly take the Federal Reserve at its word.

Read more: What the latest Federal Reserve move will mean for loans and mortgages

The surge in yields at the end of September sparked questions among Goldman Sachs rate strategists including “how much further the current selloff [in the bond market] can extend, and what the “center point” of the new range is likely to be," Praveen Korapaty, chief global rates strategist, wrote in a separate note.

Goldman Sachs quickly revised their Treasury yield forecasts. The investment firm expects the 10-year Treasury yield to stand at 4.3% for both this year and next — that's higher than prior expectations of 3.9% and 3.75%, respectively.

Meanwhile, another factor keeping pressure on Treasury yields has been the surge in the supply of bonds due to rising fiscal deficits.

Higher yields tend to be bad news for mortgage rates. That's because lenders will need to increase the yields on their mortgage-backed securities, which in turn means higher rates for home loans.

Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a house?

At the beginning of this year, the average rate on the 30-year fixed mortgage slid down to about 6%, spurring a burst of activity during the spring housing season. But the quick relief didn’t last long. Mortgage rates have climbed to a 23-year high and have remained above 7% for more than a month. And it's very likely that rates could top 8% at some point this year.

No wonder Goldman changed up.