Average US mortgage rates climbed again for the fifth week in a row, making homebuying more expensive than it was just a few weeks ago, before the outbreak of war with Iran.
The average 30-year fixed mortgage rate rose to 6.46% this week, jumping from 6.38% the previous week and reaching the highest level in seven months, according to Freddie Mac.
The rise may be unwelcome news for those hoping to buy a home this spring, typically the busiest time of year for the housing market. During the last week of February, before the US-Israeli attack on Iran, the average 30-year mortgage rate was 5.98%.
Kara Ng, senior economist at Zillow Home Loans, said the mortgage-rate shock, fueled by bond market turmoil linked to the war in Iran, could stall the spring housing market if the conflict drags on.
“If the situation resolves quickly, it’ll be early enough in the home shopping season for catch-up activity,” Ng said. The longer the war drags, though, the more homebuyers could push off until next season, she added.
Recent volatility in mortgage rates appears to be giving buyers and homeowners pause. Purchase applications fell 3% last week, while refinance applications dropped 17%, according to the Mortgage Bankers Association.
The jump in mortgage rates has made borrowing money for a home notably more expensive. For example, on a $450,000 home with a 20% down payment, a buyer who locked in a 30-year mortgage in February would pay about $1,346 less per year than someone securing a loan this week. Those savings amount to $40,000 over the life of the loan.
Mortgage rates tend to track the 10-year US Treasury yield, which pared gains after hitting its highest level since July on Friday.
Markets have been volatile as investors weigh whether higher oil prices could reignite inflation. This week, the war pushed the average price Americans are paying for gas to more than $4 for the first time since 2022.
Faster inflation, in turn, could lead the Federal Reserve to keep interest rates on hold longer – or even to hike rates.
Traders are now trying to gauge how long the energy spike may last, Ng said.
Mortgage rates don’t directly follow the Fed’s policy rate, but the central bank can influence the 10-year Treasury yield.
Speaking to students at Harvard University on Monday, Fed Chair Jerome Powell signaled the central bank may hold rates steady as officials assess the economic fallout from the war-driven global energy shock. The conflict has stoked fears both of renewed inflation and a potential recession, clouding the Fed’s path forward.
“We will eventually face the question of what to do here,” Powell said, in response to questions about energy prices. “We’re not really facing it yet, because we don’t know what the economic effects will be.”
