Mortgage rates have surged to their highest level since July, with the average rate on the 30-year fixed loan rising 7 basis points Tuesday to 6.75%, according to the outlet.
This increase is largely attributed to growing concern over the trajectory of the Iran war, which has led to rising bond yields and subsequently, rising costs such as mortgage rates.
They are now up 33 basis points in just the past 10 days and are 46 basis points higher than their recent April low of 6.29%.
The April drop in rates came after a sharp spike at the start of the war, when the rate jumped from 5.99% to 6.64% by the end of March. The researchers at the company noted this change.
Matthew Graham, chief operating officer at the company, wrote that “bonds are telling politicians to get serious about ending the war or face increasingly dire consequences.”
The move from 5.99% to 6.75% is a meaningful change in the landscape of housing affordability math, particularly for homebuyers.
For a buyer putting 20% down on a $420,000 home, their monthly principal and interest payment has gone from $2,012 to $2,179, a difference of $167.
The nation’s homebuilders are slightly less sensitive to rate moves, as they have been buying down mortgage rates to attract buyers. They have been doing this to stay competitive.
The company’s mortgage rates are still lower than they were a year ago, when they spiked over 7%.
John Lovallo, a UBS homebuilder analyst, said in an interview that “rates are a challenge, but we’re still at levels where the builders can operate effectively.”
Lovallo sees this as a buying opportunity for the builder stocks and noted that homebuilders are still seeing average order growth through the spring season. The team is hopeful about the future.
Demand for housing is still robust, with sales of pending homes rising in April both month over month and compared with a year ago, according to the report.
Lawrence Yun, chief economist for the National Association of Realtors, said that “buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates.”
The National Association of Realtors will continue to monitor the situation and provide updates on the state of the housing market, which is closely tied to the trajectory of the war and the resulting economic uncertainty, much like the recent outbreak in Africa affected global markets.
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