US mortgage rates jump to 6.57%, highest since August, MBA says

By Ann Saphir

April 1 (Reuters) – The interest rate on the most popular U.S. home loan jumped last week to its highest level since August, as rising oil prices fueled inflation fears and drove up yields on the Treasury bonds that lenders widely use as benchmarks for setting mortgage rates.

The Mortgage Bankers Association said on Wednesday the contract rate on a 30-year, fixed-rate mortgage rose 14 basis points to 6.57% in the week ended March 27.

Mortgage rates have climbed by 48 basis points since the United States and Israel launched war on Iran on February 28, threatening to make home purchases less affordable even as the Trump administration had made housing affordability a key policy goal.

Meanwhile the Federal Reserve, which had been expected to cut rates later this year, is now seen as less likely to do so for fear of reigniting inflation.

The timing of the mortgage rate spike is “inopportune,” RenMac economist Neil Dutta observed, because springtime is typically when the housing market shifts into high gear.

The last time the weekly mortgage rate rise was bigger was about a year ago, in the immediate aftermath of President Donald Trump’s “Liberation Day” announcement of larger-than-expected global tariffs.

That increase along with tariff-driven uncertainty and recession fears undercut the spring housing market. A downtrend in mortgage rates and an increase in listings earlier this year had created some cautious optimism, according to Realtor.com chief economist Danielle Hale.

Now with mortgage rates rising again and the Fed signaling caution, “uncertainty is once again threatening to sideline buyers and sellers,” she said.

HOUSING HEADWINDS

Refinancing applications tumbled 17.3% last week, the MBA said Wednesday. Applications for loans to purchase a property dropped a comparatively mild 2.6%.

“The headwinds of higher rates are being offset somewhat by the buyer’s market in many parts of the country – there are more homes for sale than buyers have seen in some time,” said Mike Fratantoni, MBA’s chief economist. “However, the shocks of the jump in rates and the increase in overall economic uncertainty are likely having an impact on buyer confidence.”

The yield on the 10-year U.S. Treasury note, the government security most influential to mortgage rates, gained 37 basis points last month as the war in the Middle East effectively closed the Strait of Hormuz, passageway for about a fifth of the world’s oil trade.

Benchmark global crude oil prices have eased after Trump said the U.S. will soon end its war on Iran, but at around $101 a barrel are still up by more than a third from before the start of the conflict.

On Wednesday, benchmark Treasury yields rose as stronger-than-expected retail sales and jobs data reinforced expectations for the Fed to keep the policy rate on hold, and as hopes for an end to the war fueled selling of safe-haven U.S. Treasuries.

(Reporting by Ann Saphir; Editing by Aurora Ellis)