And just like that, mortgage rates are back above 6.50% and may go higher.
I have been warning people for several weeks now that the worst may be behind us.
Between the factors of the year and the ongoing conflict in the Middle East, increased pressure on the levels was to be expected.
But they seemed to fall short of expectations for weeks, closing in on a bottom-6 30-year schedule despite everything going on.
Now it looks like they are back to retesting recent highs and could go even higher this month and next.
Real Estate Rates Rise As Conflicts Renew in the Middle East
We knew that the conflict in the Middle East was not over, despite the ceasefire and subsequent expansion.
Although things have been very quiet recently, the Strait of Hormuz has remained closed since day one.
And now there are new reports of drones being shot down in the UAE, attacks on US warships, several Iranian boats sunk, and more.
Simply put, there is a renewed fear that things might be okay again.
That has kept significant pressure on oil prices, which remain above $100 per barrel, and pushed the 10-year bond up nearly seven basis points a day.
Gasoline Prices Begin to Rise, Then Everything Else
The conflict has led to an increase in gas prices, directly hurting consumers. And it’s likely to affect almost everything else soon.
Remember, oil and gas affects almost everything, whether it is the production of goods, or the transportation of said goods after production.
In the end, we consumers pay the price in the form of closures to compensate manufacturers and transport companies who face higher input costs.
That usually leads to inflation, at least initially, even if it could turn into a recession further down the road.
The short-term reaction to mortgage rates will also be high, as inflation means few or no rate cuts in the near future.
There’s even talk of a price increase, but I think we’re just holding back and maintaining a wait-and-see approach.
Bond and mortgage rates tend to take cues from Fed rate expectations, meaning they stay higher until we know more.
Everything is straightforward. If oil leads to a second wave of inflation, mortgage rates will remain high or rise again.
Expect Higher Mortgage Rates in the Next Few Months
My takeaway is to expect higher mortgage rates in the next few months.
Because even if things are fixed in the Middle East, which seems unlikely, the damage of $ 100 + oil per barrel (and all related backlogs) will take time to work its way into the market.
That means prices will remain high and/or higher for months and inflation readings may rise again in the coming months.
Bond dealers, MBS investors, and mortgage lenders are likely to invest and profitably buy all of these.
No one wants to be caught offering a low interest rate only to see inflation rise again.
Adding to this account is the fact that mortgage rates tend to be higher in the spring and summer.
So it would be like timing the mortgage rates to go up again in May and June.
However, they can settle down again in the fall, as they usually do, especially during the deck election season.
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 19 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on X for the hottest.
