By Joy Wiltermuth
The spike in U.S. mortgage rates since the Iran war began in late February has been dashing hopes for an affordability boost ahead of the spring home-buying season
The Iran conflict is causing tumult in financial markets. Without Freddie and Fannie’s bond-buying program, mortgage rates would be even higher.
The spike in U.S. mortgage rates since the Iran war began in late February has dashed hopes for an affordability boost ahead of the spring home-buying season.
The 30-year mortgage rate was pegged at 6.48% on Wednesday by Mortgage News Daily, well above the 5.9% low initially touched in January after President Donald Trump announced that Freddie Mac (FMCC) and Fannie Mae (FNMA) would be buying $200 billion in mortgage bonds as part of his affordability push.
The jump in rates effectively closes a brief window of opportunity for homeowners interested in refinancing their home loans. “What’s key about 6.5% is it essentially shuts off the refi wave,” said Scott Buchta, head of fixed-income strategy at Brean Capital. “You’ve taken 90% of borrowers out of the refi window.”
The last time 30-year mortgage rates were near 6.5% was in early September, according to the Federal Reserve.
While Trump’s announcement about Freddie and Fannie’s bond-buying program grabbed headlines early this year, the housing agencies already were ramping up their bond purchases starting in the fall of 2025.
That’s kept investors in the agency mortgage-bond market on their toes about the pace and timing of these purchases. Conditions have deteriorated over the four weeks since the Middle East conflict started, triggering big swings in rates and concerns about what the Federal Reserve can do if high oil (BRN00) (CL00) prices result in more inflation.
Buying of mortgage bonds from Freddie and Fannie has provided some offset to the damage, even if higher mortgage rates keep a lid on refinancing activity. Typically, when borrowers refinance, savings in the form of lower monthly mortgage payments often make their way back into the economy.
Without Freddie and Fannie’s bond buying in the market, mortgage-bond spreads would be about 20 to 25 basis points above current levels, according to Buchta’s estimates. That would translate to a roughly 6.75% rate on new 30-year mortgages.
“They are keeping it close to the vest what they are buying,” Buchta said, adding that Freddie and Fannie aren’t going to come in and purchase $200 billion all at once. “They are spreading it out.”
The FHFA, which oversees Freddie and Fannie, didn’t immediately respond to a request for comment.
New mortgages often are priced at a spread above the 10-year Treasury yield BX:TMUBMUSD10Y, which surged to a high of 4.44% earlier this week, up from a 3.91% low in early March, according to FactSet.
The Trump administration has been looking to exert more control over mortgage rates. It also wants to ease banking rules and put some controls on Wall Street’s ownership of homes. Housing experts say building more homes remains crucial to solving the affordability crisis.
Yet launching the Middle East conflict has stoked volatility that’s gone against the administration’s affordability efforts.
“The bond-buying program certainly helps,” said Michael Bright, who previously managed Ginnie Mae’s $2 trillion mortgage-bond portfolio. However, macro-political events are “dwarfing any bond buying.”
Bright, now CEO of the Structured Finance Association, a financial-services group, pointed to recent big swings in 5-year and 10-year Treasury rates. “That’s not keeping a lid on mortgage rates.”
From January: How you could benefit from Trump’s plan for buying mortgage bonds
-Joy Wiltermuth
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03-25-26 1335ET
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