Mortgage demand rose sharply for the week ending June 5, even as the average 30-year fixed rate climbed to 6.6% amid market volatility tied to the conflict with Iran.
By yourNEWS Media Newsroom
Mortgage applications rose sharply last week despite higher borrowing costs, as buyers and homeowners moved forward in a housing market still being shaped by elevated rates, inflation pressure and uncertainty from the war in Iran.
Applications increased nearly 11% for the week ending June 5, according to Mortgage Bankers Association data released June 10. Purchase applications rose 7% from the prior week, while refinancing demand climbed 15%.
The increase came even though mortgage rates remained well above levels seen before the conflict with Iran. The average 30-year fixed mortgage rate rose 9 basis points to 6.6%. That was slightly below the recent peak of 6.65%, but still significantly higher than the prewar level of 6.09%.
Rates are about 30 basis points lower than they were a year ago.
“Mortgage rates were volatile last week as news from the Middle East continues to drive markets,” Mike Fratantoni, chief economist and senior vice president at the Mortgage Bankers Association, said in a news release.
Fratantoni said some borrowers were still able to find opportunities at slightly lower rates, helping lift application activity.
The rebound in mortgage demand comes as the housing market shows mixed signs. Redfin has said elevated rates have slowed some of the spring buying momentum. Existing home sales rose 2.8% in May to their highest level since October 2022, while new home sales climbed to the strongest level in nearly four years.
Pending sales, however, were flat in May. That measure often provides a clearer view of current conditions because it tracks homes that went under contract during the month, when mortgage rates rose to their highest level in almost a year.
“The growth of home sales has been much slower than expected this year, largely because mortgage rates are stuck in the mid-6s because of the war in Iran,” Ted Rossman, principal analyst at Bankrate, said in a statement to The Epoch Times. “If not for the war-related spike in inflation, the average 30-year fixed mortgage rate could well be in the mid-to-upper 5s.”
Mortgage rates generally move with Treasury yields, especially the benchmark 10-year yield. The 10-year Treasury yield has eased from its recent high of 4.66%, but it remains above 4.5%, the highest level in a year.
Mortgage News Daily listed the 30-year mortgage rate at 6.68% on June 9, suggesting rates remain largely stuck near current levels.
The Federal Reserve’s next steps are also becoming more uncertain. Renewed inflation pressure has unsettled investors, and traders are increasingly pricing in a possible Fed rate increase as early as December.
Fed officials will meet next week with new employment and inflation data in hand. The economy added a stronger-than-expected 172,000 jobs in May, while the unemployment rate held at 4.3%.
Inflation also rose sharply. The annual inflation rate reached 4.2%, the highest level in three years. Core inflation, which excludes food and energy, was lower at 2.9%.
Those figures could push policymakers to focus more heavily on the Fed’s price stability mandate and take a more hawkish tone.
Jeffrey Roach, chief economist at LPL Financial, said expectations for interest rates may depend in part on whether the Iran conflict continues through the summer.
“For next week, expect the Fed to remain on hold while removing any bias toward additional easing,” Roach said in an emailed note to The Epoch Times.
President Donald Trump said in a June 10 Truth Social post that Iran had taken too long to negotiate a peace agreement and would now have to “pay the price.”
“Iran’s Military is a complete and total mess. Much of it, like their Navy and Air Force, doesn’t even exist anymore,” Trump said. “They have been completely defeated. Iran is all talk and no action. The Bully of the Middle East is DEAD!!!”
Trump recently said a deal could be reached in “two or three days” and that the Strait of Hormuz, a critical oil trade chokepoint at the center of the conflict, would reopen “immediately” after a resolution.
U.S. forces launched strikes against Iran on June 9 after Tehran downed a U.S. Army Apache helicopter, according to Central Command.
For homebuyers and homeowners, the result has been a market defined by conflicting forces: mortgage demand is rising, housing sales have improved in some areas and rates are lower than a year ago, but inflation and geopolitical instability continue to keep borrowing costs elevated.
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