BY Rosemary
The average long-term mortgage rate in the United States moved higher again this week, reflecting renewed volatility in the bond market as investors react to geopolitical tensions tied to the ongoing conflict involving Iran. The rise comes as financial markets grapple with the potential inflationary impact of surging oil prices and broader uncertainty surrounding global stability.
The benchmark 30-year fixed-rate mortgage climbed to an average of 6.11%, up from 6% the previous week, according to data released Thursday by mortgage buyer Freddie Mac. Despite the recent increase, the rate remains below where it stood a year ago, when it averaged 6.65%.
The latest rise effectively brings mortgage rates back to the level seen about five weeks ago. Only two weeks earlier, the average had briefly fallen to its lowest point in roughly three and a half years, offering a glimmer of relief to prospective homebuyers who have been navigating a housing market constrained by high borrowing costs and limited affordability.
For much of this year, mortgage rates have hovered close to the 6% mark. While still elevated compared with the historically low levels seen during the pandemic, the relative stability around this range has provided a somewhat more predictable backdrop for buyers entering the spring home-shopping season. Real estate professionals note that buyers who are financially able to manage current rates are cautiously returning to the market as the busiest homebuying period of the year begins.
Shorter-term borrowing costs also increased during the week. The average rate on 15-year fixed-rate mortgages — a popular option among homeowners seeking to refinance and pay off loans faster — rose to 5.5% from 5.43% the week before. One year ago, the average for the same loan stood at 5.8%.
Mortgage rates tend to move in response to several interconnected factors. Among the most influential are expectations surrounding inflation, economic growth and the Federal Reserve’s interest-rate policy. Although the central bank does not directly set mortgage rates, its decisions on short-term interest rates play a major role in shaping bond market behavior. Investors in turn adjust their demand for government debt, which ultimately affects longer-term borrowing costs across the economy.
A key benchmark closely watched by lenders is the yield on the 10-year U.S. Treasury note, which is widely used as a guide for pricing home loans. When Treasury yields rise, mortgage rates often follow.
The yield on the 10-year Treasury moved higher this week, reaching about 4.25% by midday Thursday. That marked an increase from roughly 4.13% a week earlier, signaling growing caution among investors.
Much of the recent upward pressure on Treasury yields has been tied to a sharp increase in oil prices. Energy markets have reacted strongly to the conflict involving Iran, raising fears that sustained disruptions could push fuel costs higher worldwide. Elevated energy prices often translate into broader inflationary pressures, which in turn influence expectations for future interest-rate policy.
Under ordinary circumstances, recent economic data might have pushed mortgage rates lower. A weaker-than-expected report on U.S. hiring last month suggested the labor market may be cooling, while consumer inflation readings taken prior to the outbreak of the conflict indicated that price pressures were stabilizing.
However, analysts say geopolitical developments have overshadowed those signals.
Hannah Jones, a senior economist and research analyst at Realtor.com, noted that softer economic indicators would typically ease pressure on mortgage rates. But the uncertainty stemming from events in the Middle East has shifted the focus of investors.
“Under normal circumstances, these softer economic readings would put downward pressure on mortgage rates,” Jones said in commentary provided by email. “However, the news coming out of the Middle East is overriding those signals.”
If energy prices continue to rise and feed into broader inflation, policymakers at the Federal Reserve may face greater difficulty in lowering interest rates in the near future. Higher inflation would likely compel the central bank to keep borrowing costs elevated for longer, which could sustain upward pressure on mortgage rates.
Meanwhile, the U.S. housing market remains weighed down by the lingering effects of higher borrowing costs that began rising sharply in 2022 after the Federal Reserve launched an aggressive campaign to curb inflation. Those increases pushed mortgage rates well above the ultra-low levels seen during the pandemic housing boom.
As a result, home sales have struggled to regain momentum. Transactions involving previously owned homes have been hovering around an annual pace of roughly four million units since 2023. That level is significantly below the long-term historical average of about 5.2 million annual sales.
Existing home sales dropped to their lowest level in three decades last year and have yet to show a meaningful rebound. Early data from this year indicates the market remains sluggish. Sales in both January and February trailed the pace recorded during the same period a year earlier, even though mortgage rates are modestly lower than they were at that time.
Economists say the combination of elevated mortgage rates, limited housing inventory and affordability challenges continues to weigh on buyer activity. Many homeowners who secured ultra-low mortgage rates during the pandemic are reluctant to sell and take on new loans at higher rates, limiting the number of homes available for purchase.
While modest fluctuations in mortgage rates can influence buyer sentiment, analysts say a sustained decline in borrowing costs — along with a greater supply of homes — would likely be required to generate a more robust recovery in the housing market. For now, uncertainty in global markets and concerns about inflation remain key factors shaping the direction of mortgage rates in the months ahead.
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