Mortgage rates climbed again last week amid the rippling impacts of war in the Gaza Strip.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.57%, jumping from 7.49%. A year ago at this time, the 30-year FRM averaged 6.92%.
The 15-year fixed-rate rose to 6.89% from 6.78%. A year ago, it averaged 6.09%
“For the fifth consecutive week, mortgage rates rose as ongoing market and geopolitical uncertainty continues to increase,” said Sam Khater, Freddie Mac’s Chief Economist.
“The good news is that the economy and incomes continue to grow at a solid pace, but the housing market remains fraught with significant affordability constraints. As a result, purchase demand remains at a three-decade low.”
The Israel-Hamas war in the Gaza Strip, which erupted in extreme violence last weekend, has heightened investor fears over the U.S. economy’s stability. Much like when Russia invaded Ukraine last year, analysts have noted that turmoil around the world can depress financial systems at home.
“Global events, particularly geopolitical tensions, play a pivotal role in shaping financial markets,” Sonam Srivastava wrote in the Economic Times English Edition. “The recent Israel-Gaza tensions coming on the feet of the Russia-Ukraine crisis remind investors of the intricate web of global interdependencies.”
Treasury yields declined in the face of the violence as investors prioritized them as a safe bet. That hasn’t yet been reflected in mortgage rates, which follow treasury yields, but a decrease in average rates could come next week.
An escalating conflict involving Hezbollah in Lebanon and Iran, however, could lead to more pain. Bloomberg economists say that scenario would push oil prices to $150 a barrel and global growth down to 1.7%, taking about $1 trillion off world output.
Overall, though, the Fed is hinting at a rate hike pause in November as inflation measures continue to slowly cool. But further escalation in the war could change that calculation.
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