Mortgage rates have decreased, according to Freddie Mac. On June 18, the average 30-year fixed mortgage rate dropped five basis points to 6.47%.
Overall, the 30-year rate has been dropping daily, according to Mortgage News Daily’s rate index. Beginning June 11, rates fell with the exception of just one day. As of June 18, MND’s 30-year mortgage rate was 6.58%.
So, mortgage rates have inched down, but they’re still hovering around 6.5%. Potential homebuyers are probably wondering — will mortgage rates keep decreasing?
Over my years of reporting on mortgage rates, I’ve seen this question posed numerous times. Sometimes, the answer seems fairly clear: Yes, mortgage loan rates will probably continue falling for a while, or no, they won’t.
This is not one of those times. The current political and economic situations leave a lot of uncertainty regarding what mortgage rates will do over the next few weeks.
Mortgage rates down in response to Iran war news
The conflict in the Middle East has been a major proponent of high mortgage rates. After the United States and Israel attacked Iran at the end of February, home loan rates spiked, and they haven’t significantly dropped since.
For mortgage rates to decrease, the housing market has needed some sort of news about ending the Iran war. In mid-June, it finally got the major update it had been waiting for.
On June 17, the White House announced that it plans to end the war with Iran. The U.S. has extended its ceasefire with Iran for 60 days to hammer out the details. This discussion lasted for several days, which was likely the reason behind multiple consecutive days of rate decreases.
The U.S. also announced that it will reopen the Strait of Hormuz. This will likely be a long, complicated process, but the news was still good for mortgage rates. Prices for Brent crude oil fell after the news, per Business Insider.
It’s unclear how the processes of ending the war and reopening the strait will impact mortgage rates in the following weeks, though.
“A lasting resolution to the conflict would help bring mortgage rates down, boost consumer confidence, and housing market momentum heading into summer, however, the path will likely be rocky,” senior economist Anthony Smith wrote for Realtor.com.
Mortgage rates have decreased and are back below 6.5%.
Jessie Casson / Getty Images
Fed news could keep mortgage rates relatively high
Weekly mortgage rates may have ticked down, but they’re still in the 6.5% range. News from the June 16-17 Federal Reserve meeting could keep home loan rates well above 6% for a while.
It was Kevin Warsh‘s first FOMC meeting as Chairman. The central bank unanimously voted to leave the federal funds rate unchanged for now. However, the Fed now expects a rate hike at some point in the next six months. Of the 18 committee members, six predicted more than one hike in the next six months.
More on mortgage rates:
- Mortgage rate outlook shifts after Fed decision
- Fannie Mae predicts mortgage rate change
- Zillow discovers changes in mortgage rates, housing market
“Interestingly, Warsh noted multiple times that the housing market is one of the few places where the current level of rates is holding activity back, but the Fed is uninterested in coming to the rescue,” Chen Zhao, head of economics research, wrote for Redfin.
The Federal Reserve’s rate doesn’t directly impact mortgage rates. Home loan rates tend to follow the 10-year Treasury yield more closely.
However, many of the same issues impact the fed funds rate and the 10-year Treasury yield. Also, investor sentiment about Fed decisions can affect mortgage rates. Investors’ feelings about the Fed’s plan to hike its rate once (or more) in the next six months could keep home loan rates around 6.5% or even push them higher.
Key takeaways for homebuyers
- Mortgage rates hinge on future Iran war decisions. If the U.S. continues to make progress toward ending the Iran war, reopening the Strait of Hormuz, and lowering oil prices, then mortgage rates could keep shifting downward.
- Rates could increase before a Fed meeting. My years of tracking mortgage rates have taught me something important: If people expect the Fed to hike its rate, then mortgage rates usually fall before the meeting, not after.
- Home-buying season rates are uncertain. This awkwardly timed combination of progress in the Middle East and probable federal funds rate hikes means the future of mortgage rates is muddied. We will gain clarity as more unfolds, but the situation looks volatile.
- Don’t try to time the real estate market. I always say this regardless of the situation, but I feel the need to double-down on the message when mortgage rates are unsteady: Do not attempt to time the housing market. Don’t base your decision on when to buy on when you expect mortgage rates to drop. This is a risky and often unsuccessful endeavor.