Loan rates rose slightly today due to an apparent peace deal between the US and Iran.
However, the 30-year constant remains above the average seen before the war began a few months ago.
At first glance, it was still priced about 5/8 above where it stood at the end of February.
This tells me that investors are wary of a potential deal.
And that peace deal or no peace deal, it will take time for mortgage rates to return to those low levels.
If You Are Expecting Low Mortgage Rates You Need To Be Patient
Those hoping for a quick return to mortgage rates below 6% may have to be patient.
Although it is really encouraging to hear that the peace agreement is working, there are still many question marks.
And there’s always the chance that something will explode that will question everything again.
Therefore, bond traders and mortgage-backed securities (MBS) investors appear to be overly cautious.
It may explain why the 10-year bond yield remains near 4.50% instead of sub-4% as it was back in February.
What that means for home buyers and homeowners looking to refinance is that mortgage rates will remain high all else being equal.
We had a 30 year mortgage rate of less than 6% before the war. But now we are facing rates above 6.5% for the most part.
You could call it a war premium, or maybe tie it to higher inflation concerns related to rising oil prices.
Either way, it will take time for mortgage rates to return to those low levels.
Even when the oil starts flowing again and the ships start moving, the damage is already done.
There is also the assumption that the premium will always be there without worrying that things may settle or resurface.
In other words, loan rates may remain just eight to a quarter higher than the risks we have had in the past few months.
So if the peace deal is genuine and still in place, we might get mortgage rates back into the low 6’s, but not where they were before this whole thing went down.
Are Mortgage Rates High for Other Reasons Too?
There is also the assumption that interest rates are not only high because of the war with Iran.
We’ve had a strong stock market rally driven by a flurry of tech stocks this year.
Namely, semiconductors and anything related to artificial intelligence (AI).
Sky high ratings may add to the fear of a bubble and the need to increase the rate instead of reducing it to cool things down.
If so, Fed rate expectations could put upward pressure on mortgage rates.
So even if the war piece is taken into account, we still have issues that keep mortgage rates up for the rest of the year.
Long story short, it may mean that the sub-6% 30-year amortization continues to be elusive.
And maybe something we won’t see in 2026.
In fact, the only way we’re likely to see it is if there’s a recession like a recession, obviously nobody wants to save a few bucks on their mortgage.
Read on: Try my new loan rate calculator to quickly compare monthly payments.
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 20 years ago to help prospective (and current) home buyers better navigate the mortgage process. Follow me on X for the hottest.
