Mortgage rates rise as Iran war affects U.S. housing market
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Mortgage rates hit their highest point in five months, and mortgage applications plunged last week as escalating borrowing costs cast a heavier pall over the housing market.
Why it matters: The Iran war has triggered energy inflation that's dimming the prospects of interest rate cuts and keeping borrowing costs higher.
Zoom in: The average 30-year fixed-rate mortgage was 6.43% last week, up from 6.3% a week earlier, the Mortgage Bankers Association reported Wednesday.
- Meanwhile, mortgage applications plunged 10.5% on a seasonally adjusted basis, MBA reported.
- Refinance applications fell 14.6%.
Between the lines: Mortgage rates are priced off the 10-year Treasury yield, plus a risk premium. Both the benchmark yield and that spread have risen in March.
What they're saying: "The threat of higher-for-longer oil prices continued to keep Treasury yields elevated, and mortgage rates finished last week higher," MBA deputy chief economist Joel Kan said in a statement.
- "Higher mortgage rates, coupled with affordability constraints and economic uncertainty, pushed some potential homebuyers to the sidelines."
State of play: The housing market was already under pressure amid growing concerns about the job market and limited inventory.
- "Higher borrowing costs represent a headwind for the long-suffering housing market as it heads into the crucial spring selling season," Bloomberg noted. "Builders had already been employing incentives and cutting prices to help drum up demand and reduce inventory."
The bottom line: The ripple effects of Iran are hitting home.
