Mortgage rates continue to move lower, extending the rally from last week due to a two-week “ceasefire” in the Middle East.
However, there have already been reports of multiple events including a massive bombardment in Lebanon since the ceasefire was apparently agreed to.
In other words, it’s unclear how much of a ceasefire this really is, and at this point I’m surprised the markets are still rallying as much as they are.
So while mortgage rates will be lower today, my guess is lenders will be cautious lowering rates too much.
That could also mean that any benefit seen today could wind up being short-lived.
Lower Mortgage Rates as Ceasefire Leads to Oil Price Dump
The two-week ceasefire reportedly agreed to yesterday at the eleventh hour has resulted in a global market rally.
Stock prices surged and bond yields came down as oil prices fell below $100 a barrel.
Of course, if we rewind back to the end of February, oil prices were around $70, well below the current price of $95.
And the 30-year fixed was sub-6%, far below the 6.375% or 6.5% quote you might see today.
So it’s a bit of a one step forward, two steps back situation. Sure, we can cheer the victory, but the bigger picture is still somewhat grim.
In addition, there have multiple reports of heavy fighting since the ceasefire was announced.
A major offensive in Lebanon carried out by Israel, reports of drone activity, uncertainty about the Strait of Hormuz and whether Iran will demand a toll, and now a closure of the Strait.
Once you start to dig into the details, and look at what’s happening versus what’s being said, it doesn’t look so great.
This might mean to take the win today, but be cautious if you’re trying to decide between locking and floating a mortgage rate.
Mortgage Rates Might Bounce Back After a Nice Rally
This all leads me to believe that mortgage rates might suffer another setback soon.
They’ve fallen from recent highs of around 6.625% to roughly 6.375%, meaning they’ve come down about 0.25%.
That’s a decent move lower, but they remain about 0.375% above those pre-war levels.
And with the ceasefire decidedly tenuous, it wouldn’t shock me to see a mortgage rate reversal sometime in the next few days or weeks.
While things may have deescalated in the near-term, the future looks very uncertain.
Even today, just less than 24 hours after the ceasefire, we’ve seen intense fighting and conflict.
For me, it kind of paints the picture that it’s not going to be a quick resolution, as hopeful as the markets might be right now.
Ultimately, all we did was pull ourselves off the brink of something really bad. We didn’t solve anything.
Remember that prior to this crisis, the Strait of Hormuz was wide open and oil/energy prices weren’t a concern.
Inflation was falling and everything appeared to be moving in the right direction.
You’d be hard-pressed to say that today.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.