After being largely stagnant in recent weeks, mortgage rates rose sharply on Wednesday after President Trump said he would maintain the U.S. naval blockade of Iran until they agreed to a nuclear deal. That caused oil prices to rise and bond yields to follow.
As a result, the average 30-year fixed mortgage rate, which began rising on Tuesday, rose seven more basis points to 6.45%, according to Mortgage News Daily. This is the highest interest rate since April 3rd. Mortgage interest rates are largely based on the yield on 10-year US government bonds.
“A little over a week ago, interest rates were gearing up for further de-escalation in the Iran war. When that didn’t happen, a gentle upward trend began,” said Matthew Graham, chief operating officer at Mortgage News Daily. “Now this week that pace is accelerating as hopes of de-escalation have been replaced by fears of renewed escalation.”
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Higher interest rates since the start of the war kept home buyers away, but the number of mortgage applications to purchase a home jumped last week, up 1% this week and up 21% from the same period last year, according to the Mortgage Bankers Association.
More supply is coming onto the market and home prices are starting to fall in some markets. Real estate agents reported higher buyer volumes recently, indicating that consumers may be digesting the higher interest rate environment and ongoing uncertainty in the economy due to the war.
It remains to be seen whether this recent rise in interest rates will continue and what impact it could have on the rest of the housing market in the spring. The Federal Reserve is not expected to change interest rates at its meeting on Wednesday.
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