Politics, economy cause mortgage rates to increase by 0.16 percent

The national average 30-year fixed mortgage rate has risen for the fourth straight week, according to Freddie Mac. The 30-year rate is up 0.16% this week to 6.38%, resulting in a 0.4% total increase in March.

The average 15-year fixed mortgage rate is up for the third consecutive week. It is currently 5.75%, a 0.21% jump since last week.

During my years reporting on mortgage rates, I’ve seen that even one small rate increase can make people hesitant about getting a new home loan. And a more substantial, ongoing increase like this one is bound to affect the housing market.

Mortgage rates have increased over the last several weeks, leading to fewer mortgage applications. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 20, week-over-week applications decreased 10.5%. Mortgage refinance applications dropped by 15%.

Americans are undoubtedly hoping for mortgage rates to trend downward as we head into the spring home-buying season. But are lower rates on the menu?

Middle East conflict keeps mortgage rates high

The U.S. and Israel first attacked Iran on Feb. 28, which drove up the price of oil, the 10-year Treasury yield, and — you guessed it — mortgage interest rates.

“Three weeks into the conflict in the Middle East, mortgage rates are still driven by the volatile, elevated price of oil, especially in a week where there’s not much economic data to move the market,” said Jeff DerGurahian, chief investment officer and head economist at loanDepot.

Related: Redfin reveals major shift in housing market

Higher oil prices typically lead to higher inflation, which affects the 10-year Treasury and mortgage rates. The day before the attacks on Iran, Brent crude closed at $72.52 per barrel, per Business Insider. As of March 25, Brent crude closed at $102.22.

Even if conflict in the Middle East calms down, mortgage rates might not fall right away.

“If tensions do ease, rates won’t improve overnight,” DerGurahian said. “We could begin to see some positive movement as it will take time for oil production, shipping capacity, and broader market conditions to normalize before that relief fully works its way through to mortgage pricing.”

Federal Reserve decisions could push up mortgage rates

The fascinating — and in this case, frustrating — thing about economics is how intertwined everything is. The Middle East conflict drives up oil prices, which impacts inflation. And inflation plays a role in the Federal Reserve’s decision about whether to cut the federal funds rate.

“If oil stays elevated long enough, it starts to create more real inflation concerns,” DerGurahian said. “This has now put rate hikes back in the picture over the Federal Reserve’s next four meetings, which is obviously a very different conversation from before.”

More on mortgages and mortgage rates:

Home-buying costs are 4 times what buyers expectFannie Mae predicts shifts in mortgage rates, housing marketFinancial influencer shares if buying a home is a waste of money

At the Fed’s March 17-18 meeting, the central bank indicated that Americans could expect one fed funds rate cut in 2026. This Fed decision’s impact on mortgage rates would likely be minimal, causing rates to stay flat or inch up a bit.

But Wall Street now thinks there may be no rate cut at all in 2026. In fact, the Fed could even increase the rate.

The CME FedWatch tool currently forecasts that the fed funds rate will remain unchanged at every Fed meeting this year. It’s also starting to increase the likelihood that the Fed will increase its rate by a quarter-point in future meetings. At the time of publication, the tool puts the chance of a rate increase at 28.2% for the September meeting and 31.7% for the October meeting.

If investors anticipate a fed funds rate increase, mortgage rates will probably go up in the weeks leading up to that meeting.

Strategies for getting a lower mortgage rate

If you’re hoping to buy a home this spring, you’re likely unhappy with the recent increases in mortgage rates. Thankfully, there are ways to lock in a lower interest rate, even in a high-rate environment.

Consider an adjustable-rate mortgage (ARM). These keep your rate the same for a predetermined amount of time, then change the rate periodically. The fixed intro-rate period is typically lower than what you’d get with a fixed-rate mortgage.Buy discount points. A mortgage discount point is a fee you pay for a reduced mortgage rate. One discount point usually costs 1% of your loan principal, according to the Consumer Financial Protection Bureau, and lowers your rate by 0.25%. You’d pay more at closing but have a lower rate for your entire loan term.Look into mortgage rate buydowns. A buydown is similar to a discount point, but it’s temporary rather than permanent. Buydown terms depend on the mortgage lender, but a common program is the 3-2-1 buydown. Let’s say you get a mortgage with a 6.5% rate. The rate would would be 3.5% for the first year, 4.5% the second year, and 5.5% in year three. Then it would lock in at 6.5% for the remainder of your term. Shop for mortgage lenders. Each lender charges different interest rates and fees. According to a study by Freddie Mac, homebuyers could have saved as much as $600 per year on their loan had they gotten rate quotes from two mortgage lenders. Those who received at least four quotes could have saved more than $1,200 yearly.

Related: Financial influencer warns homeowners about this mistake

#Politics #economy #mortgage #rates #increase #percent