It’s been a topsy-turvy couple weeks for the markets, leading to wild swings in stocks, bonds, and mortgage rates.
The driver has been the Iranian conflict, which has also led to unprecedented movement in the price of a barrel of oil.
In fact, the cost of a barrel nearly doubled, briefly hitting $120, up from $65, prior to the strikes in Iran.
It has since settled down quite a bit, hovering around $85 a barrel, which is still a $20 premium compared to levels before the strikes.
The big question is will it be a short-lived affair, or the start of something bigger?
The answer may determine what happens to mortgage rates, especially important during the spring home buying season.
Will Things Get Worse Before They Get Better?
While oil prices are no longer at their peaks, 10-year bond yields are back above 4.20% and not too far from their 2026-highs around 4.29%.
If they stay there, or move even higher as this all unfolds, there’s a chance mortgage rates will revisit their highs as well.
The highest point for the 30-year fixed this year was 6.21%, according to Mortgage News Daily.
We saw those levels in late January and early February, before mortgage rates moved lower and lower, and finally slipped under 6%.
Unfortunately, that move was very brief and followed by the Iranian strikes, leading to an immediate jump in mortgage rates.
Really, it couldn’t have come at a worse time given the spring home buying season was kicking off an we were finally celebrating sub-6% mortgage rates.
Now we’re back in the teens again and the 5-handle mortgage rates seem like a distant memory.
This despite another jobs report miss last week that would normally send mortgage rates plummeting.
In other words, instead of an even lower 5-handle for the 30-year fixed, we’re back to being firmly in the 6s again.
How Mortgage Rates Could Fall Back Below 6% Again
Enough of the doom and gloom. We know mortgage rates are higher today than they were a week or so ago.
But in reality, they’re only a little bit higher, perhaps .125% to .25% compared to those sub-6% rates.
On a $400,000 loan amount, a 30-year fixed rate of 5.875% would only be $64 cheaper than a rate of 6.125%.
So big picture, it’s really not enough to dissuade someone from buying a home, at least when it comes to monthly payment.
Sure, it’s another headwind and it’s not as low as it was, but if you’re walking away from a home purchase over $65, you probably weren’t that serious to begin with.
Of course, being hesitant to move forward if you’re worried about geopolitics and the state of the world is another issue entirely.
Now here’s some good news to think about. This oil price spike could be very transitory.
If things settle down and ships can begin moving through the Strait of Hormuz again, we’ll get back on trend.
That trend prior to this mess was moderating inflation and cooling labor, which collectively got us those 5-handle mortgage rates to begin with.
In other words, we can focus on the core economy again and stop obsessing over geopolitics.
The key though will be finding a resolution sooner rather than later since we’re in the thick of another spring home buying season.
And prospective home buyers are likely growing tired of setback after setback.
(photo: k)
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.