It’s no secret mortgage rates are in a bad place right now.
But instead of talking about that all day, let’s talk about how can they get better…
Ultimately, the quickest path lower is a peace deal in the Middle East. Note that I said quickest, not easiest. It’s hard to sit here and say that it’ll be easy.
And it’s also important to point out that they always rise faster than they fall, so it’ll take time even if there’s a resolution there.
The other main component is labor, but you don’t want weakness there because it hurts the housing market, not to mention the individual who loses their job.
Mortgage Rates Need a Peace Deal to Move Lower
Ultimately, mortgage rates need peace if they’re to move back to their recent lows.
That’s why mortgage rates rose to begin with, so it’s really the only way for them to erase this big move higher.
If you recall, the 30-year fixed had been at 3.5-year lows prior to the conflict at the end of February and early March.
Just as we finally got our long-awaited sub-6% mortgage rate, poof, it was gone in a flash.
It was the cruelest of scenarios, but kind of what you expect if you’ve been around the mortgage industry long enough…
When things finally start looking good, they seem to disappear just like that. And that’s exactly what happened.
While there was some hope in April after a bad March, May is when things finally got real for mortgage rates.
I had been warning folks that things were going to get worse, and that the $100+ barrel oil was going to find its way into inflation numbers and push mortgage rates higher.
But for a while, everyone was attempting to “look through” it all and bank on it being transitory.
We were also told repeatedly that the whole Iranian operation would be wrapped up in days, or a week, or just a few more days.
Now it’s feeling a lot like a quagmire with no end in sight. And the market finally decided to take it seriously.
That’s why you have the near-7% mortgage rates again. Reality set in.
So it’s pretty clear the best and fastest way to get lower mortgage rates is for the U.S. and Iran to come to some sort of deal. And quickly.
Good Chance Mortgage Rates Get Worse Before They Get Better
Now before things improve, they could get worse. It’s just one of those things where the trend is not your friend.
And it takes time for a reversal to take place. In the meantime, you get even higher rates.
So much higher can they go you ask?
Well, for a while I’ve been pointing to 6.875%, maybe a low 7-handle for the 30-year fixed. That looks fairly likely at this juncture.
After all, we’re around 6.75% now so it’s only an .125% to a .25% away. Yikes!
It seemed crazy a few weeks ago, when I first started bringing this up, but now it’s probably looking like a rather conservative estimate.
Funny how that works.
There Will Be Good Days and Bad Days for Rates
Just remember that mortgage rates don’t move in a straight line up or down.
There will always be ebbs and flows, good days, bad days, good weeks and bad weeks.
That means there will be opportunity at times to lock in a lower mortgage rate and you’ll need to stay vigilant if you’re shopping rates.
In addition, remember that when there’s a lot of volatility in mortgage rates, rate dispersion is higher.
This means there’s a wider range of rates being offered by banks, lenders, credit unions, etc. So be sure to gather multiple quotes and negotiate even more aggressively!
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