u/truthaboutmortgage

This is a very important weekend for mortgage rates with talks taking place regarding the ME situation.

My thinking is rates face more risk to move higher than they do lower.

One because they already came down about 0.25% from recent highs, despite any real (or convincing) improvement on geopolitics.

Two because seasonally they tend to be highest in spring/summer. So the historical trend simply works against them here.

And three because they were at 3.5-lows before this all transpired. It would perhaps be different if they were "high" going into this situation.

So there's not a super compelling reason for them to revisit those lows. Being about a half-point above the lowest levels since 2022 actually seems decent given all that's going on.

Oil prices are back near $100/barrel on a flimsy ceasefire agreement.

Bond yields back to around 4.31% from nearly 4.20%.

Still wonder if we test higher-highs for the 30-year fixed in the coming weeks/months.

Something like a 6.75% or 6.875%. Perhaps just shy of 7%.

Wouldn't shock me given how tenuous things are and how long oil disruptions will take to normalize, even if they don't worsen from here (which is clearly not a guarantee).

Remember, mortgage rates are historically the HIGHEST in the months of May and June (I did the research).

And lowest in February (that was certainly true this year!).

Of course, at a certain point you start pricing in a recession if things don't improve.

And you'd imagine the midterms will force action to drive rates lower too, given it's long been a policy goal to get them down again.

Nice move lower today for bond yields. The 10-year dropped as much as 10 bps before pulling back a bit as the day has gone on.

Should result in 30-year fixed mortgage rates back around ~6.375% or lower based on MND's index.

But they remain about 0.375% above late February lows and the "ceasefire" appears to be tenuous at best.

There has already been numerous reports of conflicts and now even the closure of the Strait of Hormuz.

Long story short, it's quite possible any improvement in mortgage rates today is short-lived and subject to a bounce.

I'm actually somewhat surprised markets are still rallying given what is being reported.

But all things considered, mortgage rates are still holding up fairly well and could be a lot worse given the news.

Mortgage rates have been pretty resilient despite what has transpired over the past month and change.

Yes, the 30-year fixed is about 40 basis points higher than it was in late February, but rates are down nearly 25 bps from a week ago, per MND.

And it's very important to remember that mortgage rates were at 3.5-year lows prior to the start of the conflict in late February.

In other words, we're not in a terrible place when it comes to rates. My fear though is things could get worse before they get better.

I still believe we see a leg higher in rates before the dust settles.

Since this all got underway, I've felt the 30-year fixed could hit the high 6s and perhaps have a brief spell in the low 7s on renewed inflation concerns related to energy prices.

Even worse, this might all take place in peak spring home buying season.

It's especially unfortunate because rates were such a bright spot and had everyone feeling super optimistic that this would finally be the year the housing market turns a corner.

The best-case scenario is we get some sort of peace deal as soon as possible, and perhaps some movement in the Strait.

But one should also prepare for the worst, a ratcheting up of the situation that leads to even higher energy prices, an uptick in inflation, and another leg higher for mortgage rates.

How high they might go remains to be seen, but I wouldn’t completely rule out the very high 6s or even low 7s if things don’t get under control soon.

In the meantime, enjoy the pullback but don't be shocked if it reverses course.