A ceasefire in the Middle East briefly eases mortgage rates — but the relief is measured in basis points, not affordability

Mortgage applications fell 0.8% last week from the previous week, even as the average 30-year fixed mortgage rate dropped to 6.37% from 6.46%. The decline follows a two-week ceasefire between the U.S. and Iran, which eased bond market pressure and pulled the 10-year U.S. Treasury yield down to 4.28% from 4.3%. The 15-year fixed rate also eased, falling to 5.74% from 5.77%. Just six weeks earlier, the 30-year rate had briefly dipped under 6%, raising hopes for homebuyers entering the spring market. But the war with Iran pushed oil prices and inflation expectations higher, driving Treasury yields up from 3.97% in late February and reversing the trend. The Federal Reserve does not set mortgage rates, but its rate policy influences investor expectations, which in turn affect the 10-year Treasury yield — a benchmark banks use to price loans. Any relief from the ceasefire may not last, according to Jiayi Xu, an economist at Realtor.com: “Until a more permanent resolution emerges, the fog of uncertainty is unlikely to fully lift from the housing market.” Homebuyers who were priced out six weeks ago remain priced out despite the minor rate drop. Sales of previously occupied homes remain at a 30-year low and have declined year-over-year in January and February.