Key facts
- US crude oil prices exceeded $90 per barrel due to the conflict with Iran.
- February's jobs report indicated a slowdown in job creation and an increase in unemployment.
- Ten-year Treasury yields decreased to approximately 4.13%, impacting mortgage rates.
- The average 30-year fixed mortgage rate rose to 6.00% for the week ending March 5.
- Economists predict mortgage rates will remain elevated, likely between 6% and 6.5%.
US crude oil prices surged above $90 per barrel on Friday, driven by the ongoing conflict with Iran, while a weaker-than-expected jobs report for February led to a slight decrease in Treasury yields. The 10-year Treasury yield, a key indicator for 30-year fixed mortgage rates, fell to around 4.13% from 3.93% earlier in the week. Despite this dip, the average 30-year fixed mortgage rate edged up to 6.00% for the week ending March 5, according to Freddie Mac, influenced by the rise in bond yields.
Economists and industry experts do not foresee a significant drop in mortgage rates in the near future. Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA), noted that while job growth is slowing, inflation is expected to rise due to increased oil prices stemming from the Iran conflict. He indicated that the Federal Open Market Committee (FOMC) is unlikely to cut rates soon, keeping the MBA's forecast for rates in the 6% to 6.5% range unchanged. This outlook suggests a headwind for housing demand as the spring homebuying season approaches.
Thomas Feltmate, senior economist at TD Bank, echoed concerns about inflation, citing the escalation of the Iran conflict as an upside risk to oil prices. He emphasized that price stability remains a primary concern for the Fed's dual mandate, with core inflation measures still elevated. Fed futures are not fully pricing in the next rate cut until September, with doubts about a second cut this year. Mortgage brokers also expressed skepticism about falling Treasury yields or Fed funds rates, highlighting that war is inherently inflationary due to oil price spikes and the potential for increased money printing by the Fed.