Mortgage rates hit their highest level in over a month this week, reversing course after a period of improvement.
The average rate on the 30-year fixed rate jumped 22 basis points Monday and another 3 basis points Tuesday to 6.85%, according to Mortgage News Daily, fully erasing the decline from last week.
Much like the stock market, the bond market has been on a roller coaster over the last week, and mortgage rates are along for the ride.
Last week the 30-year fixed rate dropped to the lowest level since last October after President Donald Trump announced global tariffs. The announcement sent the stock market plunging and investors rushing to the relative safety of the bond market. As a result, bond yields fell. Mortgage rates follow loosely the yield on the 10-year Treasury.
“Last week’s drop was a knee-jerk reaction that priced in more dire economic expectations,” said Matthew Graham, chief operating officer at Mortgage News Daily.
“So far this week, bonds are less panicked after several officials have discussed tariff negotiations and deals. Just this morning, when [Treasury Secretary Scott] Bessent referred to tariffs as a melting ice cube, we saw an immediate reaction in the market. Bottom line, rates took a lead off last week as economic fears surged. Now they’re back on base and waiting for the next pitch,” he said.
The initial drop in mortgage rates last week had housing watchers cheering a potential boost to the lackluster spring market. Mortgage rates had been moving in a very narrow range since the end of February, lower than last year, but not by much. Homebuyers are also contending with high, and still rising, home prices, as well as dwindling confidence in the broader economy and their own employment.
“The spring housing season is beginning with more sellers and a growing number of homes for sale,” said Danielle Hale, chief economist at Realtor.com, in its March housing report. “But the high cost of buying coupled with growing economic concerns suggest a sluggish response from buyers in early spring.”
The biggest drop in rates so far this year came not last week, but in January and February, when the 30-year fixed mortgage fell from a high of 7.26% to 6.74%. Despite that decline, pending home sales, which are a measure of initial signed contracts on existing homes, and therefore the most recent indicator of activity, rose just 2% in February from January, according to the National Association of Realtors. Sales were still 3.6% lower than February 2024.
“Despite the modest monthly increase, contract signings remain well below normal historical levels,” said Lawrence Yun, NAR’s chief economist. “A meaningful decline in mortgage rates would help both demand and supply — demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.”
The next significant move in mortgage rates could come as the market digests new economic data, namely Thursday’s consumer price index and Friday’s produce price index reports. Both have a strong track record of influencing rate momentum.
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