Mortgage market could be about to face another spell of uncertainty as Iran truce crumbles
A cooling of tensions between the US and Iran in recent weeks sparked hopes that mortgage rates, which spiked after war erupted at the end of February, could be set for a prolonged downward shift.
But 10-year Treasury yields, a key driver of 30-year fixed mortgage rates, ticked sharply higher on Wednesday morning after President Trump declared the ceasefire “over” amid a fresh wave of military strikes.
That influential yield had climbed by more than five basis points at time of writing, inching above 4.58%, while oil prices also jumped as hopes of a prolonged truce crumbled.
For the mortgage market, that latest oil price surge could be significant because it risks putting upward pressure on inflation – raising the prospect of the Federal Reserve increasing interest rates to keep price growth under control.
Mortgage rates on the up – are further spikes ahead?
Last week, the 30-year fixed rate moved slightly higher, increasing to 6.58% according to the Mortgage Bankers Association’s (MBA) latest weekly mortgage applications survey. Overall applications were down by 2.2% from a week prior, including an adjustment for the July 4 long weekend.
The national housing market has failed to gather noteworthy momentum this year – and mortgage market commentators view the Iran war as one of the most prominent factors pushing potential buyers to the sidelines.
In April, Loan Factory chief executive officer Thuan Nguyen told Mortgage Professional America the market’s future “all depends” on Iran, with fears strengthening as the conflict rumbled on that rates could be headed toward the 7% mark.
That never materialized, with average rates hovering in the mid-sixes in recent weeks. But mortgage industry veterans including William Raveis Mortgage’s Melissa Cohn have also warned that the economic impact of the conflict would likely linger even if the ceasefire proved permanent.
Mortgage industry braces for another bumpy spell
The MBA’s latest figures show a market that was sluggish even before the latest resumption of hostilities between the US and Iran. The association’s adjusted Refinance Index was down 4% from the previous week (but 8% higher unadjusted, year over year) while the seasonally adjusted Purchase Index dipped by 1% from the same time last year.
Prospects of an immediate dash to the negotiating table by American and Iranian representatives currently seem distant. Trump, speaking at the ongoing NATO summit in Turkey, said the US delegation viewed negotiations as “a waste of time” and dismissed possible further talks.
“I don’t want to deal with them anymore… as far as I’m concerned, it’s over,” he said in response to a reporter’s question.
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