After a good week for mortgage rates, when they fell back to 6.50%, they seem to be on the rise again.
The latest driver is (surprise, surprise) tensions in the Middle East and high oil prices as a result.
That sent the 10-year bond yield back nearly five basis points today, which would translate to higher 30-year mortgage rates as well.
This kind of volatility is to be expected, especially since both sides seem unwilling to back down or make any major concessions.
The big question is how long the frenzy can last, and how high mortgage rates will fare in the process.
More Uncertainty in the Middle East Leads to Higher Loan Levels
It was not a good weekend of turmoil in the Middle East.
There have been reports that the US and Iran are exchanging fire.
And the continuation of Israeli strikes in Lebanon, which has caused Iran to suspend negotiations with the US
It does not bode well for an end to the ongoing conflict, or an end to the conflict that might lead to the reopening of the Strait of Hormuz.
As I have stated in the past, that is what has increased the mortgage rates which have increased by about 0.75% since the end of February.
Without this conflict, it’s hard to imagine a 30-year mortgage rate being higher than 6% today.
Nothing else has really changed since then, so like I said before, it’s a clear case with a clear resolution.
But at this point even the most obvious solution (opening the Strait) would take time to implement, and would not be without its impact.
Oil prices may remain high even after reopening, meaning consumers will continue to face higher gas prices.
In addition, higher input costs for everything else could lead to another episode of inflation as businesses pass costs down.
Simply put, bonds and mortgage-backed securities (MBS) don’t like inflation, so yields (interest rates) rise to compensate.
Another Leg of Mortgage Rates Coming?
I posted this chart last week showing the mortgage rates that have gone up over the past few months, which seem to be hitting a record high.
So despite the usual ebbs and flows, and pullbacks after upswings, it seems to be on the upswing as the year goes on.
They touched around 6.75% at their worst (so far) in mid-May before pulling back to 6.50% last week.
If we assume that this Iran-US conflict continues, which seems likely, the next leg would be 6.875% or 7%.
As things stand, my adjusted 30-year goal is around 7%, although I’ve only just “kissed” 7%.
In other words, there is a small cap on the loan amount because most see this power problem as temporarilyas it was in the past.
And many other things, regardless of whether the job or the loan is spread relatively well, it is likely that this issue can be removed.
That may mean that the range of mortgage rates is tight here, even if it continues to be under pressure.
Maybe that’s the silver lining if there is one.
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.
