Right now, we are living in a somewhat volatile world. Not only do economic conditions and events within our country affect mortgage rates, but world events do as well.
Just a few weeks ago, we were celebrating the fact that mortgage interest rates finally broke through the 6% barrier and dipped into the 5% range. The result was a huge upsurge in homebuyer interest, home purchase activity, and mortgage refinances. It was the break we had all been waiting for.
Shortly after this dip in mortgage rates took place, war broke out in the Middle East with significant involvement from the United States. Much of our national economy suddenly shifted, and mortgage rates changed as well.
Fortunately, the recent increase in mortgage rates has been minor and hasn’t been substantial enough to make a huge difference in the cost or payments of a new home loan. Mentally, however, that rise above 6% has again slowed home purchase activity.
Rates have only moved slightly above the 6% mark, so if you were to calculate the cost of a mortgage today versus two weeks ago, you would find there is only a minimal difference.
My guess is that the war in the Middle East will end soon, and once again rates will decline below 6%. If you are wanting or needing to purchase a home right now, do the math. I think you will find that waiting for rates to dip again may not be necessary.
The following is an article from the National Association of Realtors that discusses this in more detail.
After briefly dipping below 6%, mortgage rates are edging higher again—but the actual payment difference may be smaller than buyers think.
A difference of about $27 per month in payments could be making some prospective home buyers jittery after seeing headlines that mortgage rates are rising again. The 30-year fixed-rate mortgage averaged 6.11% this week, according to Freddie Mac, up from 5.98% two weeks ago, when rates briefly dipped below 6% for the first time since 2022.
“While the increase from 5.98% to 6.11% was a relatively strong move, it was largely expected given recent geopolitical developments and the upward trend in the 10-year Treasury yield, which mortgage rates tend to follow,” says Nadia Evangelou, principal economist and director of real estate research at the National Association of REALTORS®.
“Geopolitical developments can create short-term volatility in financial markets. Since mortgage rates tend to follow movements in the 10-year Treasury yield, the current shifts in global conditions are expected to bring temporary fluctuations in mortgage rates as well,” she says.
Still, before buyers panic, they may want to keep the numbers in perspective: The difference between a 5.98% rate and this week’s 6.11% rate on a $400,000 home with 20% down amounts to about $27 more per month in a mortgage payment.
Many financial experts say the move above the 6% threshold is more psychological than financial for buyers, even as concerns about rising rates begin to resurface.
Global tensions are creating uncertainty. The Iranian conflict has contributed to recent market swings, pushing gas prices higher and renewing concerns about inflation. Meanwhile, the Federal Reserve is scheduled to meet next week to decide the direction of its short-term benchmark interest rate. While the Fed doesn’t directly set mortgage rates, its policies often influence them.
“Financial markets were volatile last week amid the ongoing turmoil in the Middle East,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a statement. “Borrowers in recent weeks were able to get 30-year conforming rates below 6%, but with the current volatility, longer-term rates have moved up.”
The Difference in Mortgage Payments
How much difference does a slightly higher mortgage rate make?
For a $400,000 home with 20% down, monthly payments would look roughly like this:
- 5.98% rate: $1,914 per month
- 6% rate: $1,919 per month
- 6.11% rate: $1,941 per month
A year ago, when 30-year mortgage rates averaged 6.65%, that same mortgage payment would have been about $2,054 per month—about $113 more each month than today’s average.
Housing Market Show Signs of Improvement
Housing affordability has improved slightly as home prices have moderated, and mortgage rates have fallen from the mid-to-high 6% averages seen a year ago. The shift appears to be helping home sales gain traction heading into spring.
NAR reported this week that existing-home sales rose 1.7% in February compared to January, as housing affordability improved nationwide.
Mortgage applications for home purchases—a gauge of future home sales—also have been increasing. Applications were 11% higher last week compared to a year earlier, according to the Mortgage Bankers Association.
With purchase applications rising, it’s “a welcome sign as buyers enter spring home buying season with rates down more than half a percentage point compared to the same time last year,” says Sam Khater, Freddie Mac’s chief economist.
Haas Team Real Estate
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