Mortgage interest rates in the United States spiked last week, marking the largest weekly increase in 11 months and lifting the benchmark 30-year fixed mortgage to levels not seen since October. The Mortgage Bankers Association (MBA) reported that the contract rate on a 30-year, fixed-rate mortgage rose 13 basis points to 6.43% in the week ended March 20, the highest in nearly six months.
The MBA said the move follows a month that began with mortgage rates at their lowest since September 2022, but that those rates have climbed by 34 basis points across a three-week span since the U.S. and Israel conducted air strikes against Iran. Last week’s rise was the largest weekly increase since April.
Treasury yields and oil: The association and market data pointed to a close link between elevated oil prices tied to the war in Iran and higher yields on the government bonds most influential to mortgage rates. The yield on the 10-year U.S. Treasury note - the security that typically moves most closely with mortgage pricing - has risen significantly since the onset of the conflict and reports that Iran effectively closed the Strait of Hormuz, reducing the flow of roughly a fifth of global petroleum.
Benchmark global crude oil prices have increased from about $75 a barrel in late February to around $100 a barrel now. Over the same period, the 10-year Treasury yield climbed from 3.96% on the Friday before the attacks began on February 28 to 4.39% on Tuesday, matching its highest end-of-day level since July.
Mortgage demand and application trends: Higher note yields and rising mortgage rates translated into a notable pullback in borrowing activity. The MBA’s weekly applications index fell 10.5% last week to 310.7, the lowest reading since January. Refinance demand led the drop, with applications to refinance existing loans down 14.6%. Applications for purchase mortgages also declined, slipping 5.4%.
“The threat of higher for longer oil prices continued to keep Treasury yields elevated, and mortgage rates finished last week higher,” said Joel Kan, MBA’s vice president and deputy chief economist. “Given this period of increasing mortgage rates and diminishing refinance incentives, refinance applications decreased 15 percent as applications across all loan types declined. Purchase applications were also down last week, as higher mortgage rates, coupled with affordability constraints and economic uncertainty, pushed some potential homebuyers to the sidelines.”
Market positioning and the Federal Reserve outlook: Traders in bond and interest rate futures have adjusted expectations in response to the run-up in yields. Markets have shifted toward the view that the U.S. Federal Reserve may postpone cutting interest rates this year. Before the conflict began, the market had anticipated at least one 25-basis-point reduction in policy rates this year; that expectation has since been scaled back.
What the data show:
- 30-year fixed mortgage rate: increased 13 basis points to 6.43% for the week ended March 20.
- Three-week change since air attacks began: mortgage rates up 34 basis points.
- MBA weekly applications index: fell 10.5% to 310.7, the lowest since January.
- Refinance applications: down 14.6%; purchase applications: down 5.4%.
- 10-year Treasury yield: rose from 3.96% on the Friday before February 28 to 4.39% on Tuesday.
- Global benchmark crude: rose from about $75 a barrel in late February to around $100 a barrel.
The MBA’s figures paint a picture of a housing finance market reacting to higher borrowing costs and shifting expectations about monetary policy and energy-driven inflation pressures. Mortgage activity has softened for both homeowners seeking to refinance and for prospective buyers weighing affordability in a higher-rate environment.
Given the data and the MBA’s commentary, lenders, mortgage-dependent service providers, and prospective homebuyers remain sensitive to movements in oil prices, Treasury yields, and central bank guidance - all factors that have recently pushed mortgage costs higher.