After spending a week in sub-6% territory for the first time since 2022, the 30-year fixed-rate mortgage again has a psychologically imposing 6 ahead of the decimal point.
The 30-year rate averaged an even 6.00% for the seven-day period ending Thursday, according to Freddie Mac. Last week, the 5.98% average offered renewed hopes for a steady rate downturn and an active spring homebuying season.
Despite the uptick, Freddie Mac Chief Economist Sam Khater struck an optimistic tone in commentary accompanying the rate survey results.
“Mortgage rates held steady at 6% this week, hovering near their lowest level since 2022,” Khater remarked. “In fact, rates are down nearly a full percentage point from this time in 2024, spurring activity from buyers, sellers and owners. As a result, refinance activity is up, and purchase applications are ahead of last year’s pace.”
Data from the Mortgage Bankers Association shows that many homebuyers and existing homeowners grabbed a 5-handle while they could last week. Purchase applications rose a seasonally adjusted 6.1% for the week ending Feb. 27, according to the association, while refinances increased 14.3%.
Where interest rates go from here may depend largely on how the burgeoning war in Iran progresses. Joint airstrikes by the United States and Israel on Iranian sites began on Feb. 28, destabilizing the region and causing an oil shock that rippled across global markets.
Mortgage rates take their cue from Treasury bond yields, and fixed-income investors have responded with trepidation to the escalating conflict in the Middle East.
On Feb. 27, the 10-year Treasury yield stood at 3.952%. At the close of core trading on Wednesday, it was up to 4.104%.
The economic impacts of the war in Iran will also play a role in U.S. monetary policy and the setting of short-term interest rates that have some impact on longer-dated bond yields — and, by extension, mortgage rates.
In commentary released Monday, Wells Fargo Chief Economist Tom Porcelli noted that “absent a prolonged war and major long-term disruptions to key shipping routes in the Strait of Hormuz, the impact on U.S. economic growth, inflation and monetary policy should remain modest.” But he quickly added, “Of course, the opposite also could be true.”
For now, Porcelli’s economics team expects the Federal Reserve’s rate-setting committee to “take the long view” and “look through oil-driven inflation shocks.”
“Our forecast for 50 bps of rate cuts this year remains unchanged,” Porcelli wrote.
Trading of futures contacts tracked by CME FedWatch currently projects the Fed will hold rates steady for at least its next three meetings, with a 50-50 chance of a rate cut by July.
About half of traders are betting on one rate cut or fewer by year-end, with about 30% concurring with the Wells Fargo economists that 50 basis points of cuts are likely forthcoming in 2026.
