Ceasefire in the Middle East has sent Treasuries tumbling, and mortgage rates could follow
While mortgage applications declined again last week, there could be some good news on the horizon for mortgage rates.
The Mortgage Bankers Association (MBA) released its latest report on Wednesday, showing applications fell 0.8% from the previous week.
However, the ceasefire announced late Tuesday is already having ripple effects on the markets. As of 9:45 a.m. today, the 10-year Treasury, which is most closely tied to mortgage rates, was down nearly 10 basis points.
If Treasuries continue to fall, mortgage rates could follow. The MBA reported a 30-year mortgage rate of 6.51% in this latest report, down from 6.57% the previous week.
Joel Kan, MBA vice president and deputy chief economist, said the elevated rates continue to keep buyers and refinancers on the sidelines.
“Higher mortgage rates and continued economic uncertainty weighed down on mortgage applications again last week,” Kan said. “While mortgage rates saw a slight reprieve, with the 30-year fixed rate decreasing to 6.51%, many potential refinance borrowers have been frozen out by the sharp increase over the past month. The pace of refinance applications was at its lowest level since December 2025.”
Rates causing a slow start to spring
Because rates have risen during the Iran War, refinances and purchases have slowed. The MBA’s refinance index fell 3% from the previous week and 4% from the previous year. The unadjusted purchase index showed a small increase of 1% week over week, but a 7% drop from last year.
“Overall purchase activity has also been adversely impacted by current conditions – purchase applications were 7 percent lower on a year-over-year basis, the first annual decline since January 2025,” Kan said. “However, certain loan types and geographic segments are faring better than others because of lower rates on ARM and FHA loans, as well as growing housing inventory in some local markets.
“FHA purchase applications were up 5 percent over the week, supported by the FHA mortgage rate being about 30 basis points lower than the conventional mortgage rate.”
The percent of overall activity attributed to refinances fell to 44.3%, down from 45.3% last week. Adjustable-rate mortgages (ARMs) increased to 8.6% of all loan applications.
The FHA percentage of all applications fell to 19.3%, down 0.2% from last week. VA loan share remained level at 16.1%, as did USDA loans at 0.5%.
Jumbo loan rates on 30-year mortgages also fell this week to 6.54%, down from 6.59%. FHA loans continued to outpace rates on conventional mortgages. The 30-year FHA mortgage rate this week was 6.22%, down from 6.25% last week.
Global events watched closely
If the ceasefire holds in the Middle East, rates should retreat as oil prices continue to drop. The price of Brent crude oil, which peaked at $115.85 a barrel in late March and closed at nearly $110 a barrel yesterday, was down to around $90 a barrel today.
A continued drop in oil prices could ease inflationary pressures on the economy, allowing the Federal Reserve to resume easing interest rates. CME FedWatch, which as recently as yesterday wasn’t predicting a cut until late 2027, has again increased the chances of a cut in 2026.
However, the ceasefire is a tenuous one at best. Strikes continued as of Wednesday morning, with Iran threatening to close the Strait of Hormuz again if a complete ceasefire on all fronts is not reached.
While the news has provided temporary relief to the market, brokers will need to keep an eye on world events to see if the good news is going to last throughout the spring buying season.
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