U.S. mortgage rates went up again this week as global tensions and the Iran war created panic in financial markets. The average 30-year fixed mortgage rate increased to 6.37% from 6.3% last week. This is the second straight weekly rise in mortgage rates, showing that borrowing costs are becoming unstable again. One year ago, the same 30-year mortgage rate was higher at 6.76%, according to Freddie Mac.

The average rate for a 15-year fixed mortgage also rose to 5.72% from 5.64% last week. A year ago, the 15-year mortgage rate stood at 5.89%, according to Freddie Mac. Experts say the war involving Iran pushed oil prices higher, and that increased fears of inflation in the U.S., according to ABC News. Higher inflation fears usually make bond market investors demand higher yields, and that pushes mortgage rates up.

Mortgage rate rise

Mortgage rates in the U.S. closely follow the movement of the 10-year Treasury bond yield. The 10-year Treasury yield reached 4.37% on Thursday, compared to 3.97% in late February before the Iran conflict intensified. Mortgage rates had briefly dropped below 6% in late February for the first time since 2022. Since then, rates have climbed back into the mid-6% range and have not gone below 6% again.

Higher mortgage rates can add hundreds of dollars to monthly home payments, making homes less affordable for buyers, as stated by ABC News. The unstable mortgage market is hurting the spring homebuying season, which is normally the busiest time of the year for U.S. housing sales. Sales of previously owned homes in the U.S. fell during the first three months of the year compared to last year.

Housing market pressure

The U.S. housing slowdown has been continuing since 2022 when mortgage rates started rising sharply after pandemic-era lows. Lisa Sturtevant, chief economist at Bright MLS, said hopes for mortgage rates below 6% this spring have now “disappeared”. Lisa Sturtevant also said buyers and sellers may continue facing mortgage rates in the mid-6% range through summer.

Hannah Jones, senior economic research analyst at Realtor.com, said the latest Middle East tensions reminded markets that lower rates depend heavily on stability in the Persian Gulf region. Mortgage rates have been moving up and down quickly depending on war developments and possible peace talks involving Iran and the U.S., according to Yahoo Finance. Rates rose when tensions increased between the U.S. and Iran.

Iran war impact

Rates fell temporarily whenever there were signs of possible peace negotiations. Economists are also watching U.S. jobs data closely because it can affect mortgage rates. If the labor market weakens, Treasury yields and mortgage rates could fall. If the jobs report is stronger than expected, mortgage rates could rise even more. Zillow data showed that homebuyer demand dropped in April compared to March.

Mortgage applications for new homes also fell 4% in one week as rates touched their highest levels in a month, according to Mortgage Bankers Association data. Despite slower buyer demand, housing inventory is improving for shoppers. The number of homes available for sale rose 4.6% compared to last year because homes are taking longer to sell, according to Realtor.com data cited by ABC News. Many home sellers are lowering asking prices because the market has softened. Home listing prices fell in April compared to a year ago for the sixth month in a row.

Current mortgage rates

Current national average mortgage rates from Zillow show:

• 30-year fixed mortgage: 6.26%
• 20-year fixed mortgage: 6.12%
• 15-year fixed mortgage: 5.60%
• 5/1 ARM: 6.21%
• 7/1 ARM: 6.07%

VA loan rates are currently lower than regular mortgage rates. Current refinance rates are slightly different from purchase mortgage rates. A fixed-rate mortgage keeps the same interest rate for the entire loan period. An adjustable-rate mortgage, also called ARM, starts with a fixed rate for a few years and later changes based on market conditions, according to Yahoo Finance.

Experts say people with higher credit scores, lower debt, and bigger down payments usually get better mortgage rates. Mortgage lenders also look at the overall economy before deciding rates. When the economy slows down, rates often fall to encourage borrowing and spending. When the economy is strong, mortgage rates usually rise to control inflation and spending.

A 30-year mortgage has lower monthly payments but costs more in interest over time. A 15-year mortgage has higher monthly payments but saves borrowers money in long-term interest costs. Yahoo Finance said some lenders currently offering among the lowest median mortgage rates include Chase and Citibank. Experts say the record-low 30-year mortgage rate in U.S. history was 2.65% in January 2021. Experts also said it is extremely unlikely mortgage rates will fall below 3% again anytime soon.

Financial experts say refinancing is usually considered useful if borrowers can reduce their mortgage rate by around 1% to 2%. Overall, the housing market remains under pressure because war fears, inflation worries, rising Treasury yields, and economic uncertainty are all keeping mortgage rates elevated, according to ABC News.

FAQs

Q1. Why are U.S. mortgage rates rising again?

Mortgage rates are rising because of inflation fears, higher oil prices, and global tensions linked to the Iran conflict.

Q2. Will mortgage rates go below 6% soon?

Experts say mortgage rates may stay in the mid-6% range for the next few months due to economic uncertainty.