WASHINGTON — Volatility in mortgage rates driven by geopolitical tensions tied to Iran is disrupting the spring homebuying season, as government-backed entities step in to stabilize the market, according to one new analysis.
Mortgage rates have been swinging sharply from day to day, unsettling borrowers and complicating lending pipelines nationwide, National Mortgage Professional reported. The fluctuations are being fueled by instability in U.S. Treasury yields, which have reacted to oil price swings and shifting inflation expectations linked to the conflict involving Iran.
In response, Fannie Mae and Freddie Mac have increased purchases of mortgage-backed securities in an effort to support liquidity and temper rate increases, according to the report.
Citing Bloomberg, National Mortgage Professional said the two government-sponsored enterprises have been bidding aggressively in the market, with total purchases estimated at roughly $200 billion.
Despite those efforts, mortgage rates have climbed back into the mid-6% range in recent weeks, reversing earlier declines and reaching multi-month highs as market volatility intensified.
‘Disruptive’ Trend
For loan originators, the rapid movement in rates is proving more disruptive than the overall level of borrowing costs, according to National Mortgage Professional, which reported that borrowers are hesitating on whether to lock in rates, while others are seeing affordability shift mid-transaction, forcing renegotiations or cancellations.
Among the challenges cited are rate locks moving out of the money within days, delayed or abandoned applications, and last-minute adjustments to purchase transactions — all contributing to uncertainty during what is typically the busiest homebuying period of the year.
Limited Impact
The intervention by Fannie Mae and Freddie Mac has helped support bond prices and, at times, briefly pushed mortgage rates lower, the report said. However, the scale of the U.S. mortgage market limits the impact of such efforts, particularly amid broader concerns over inflation and geopolitical instability.
National Mortgage Professional said the current cycle differs from past crises, when investors typically moved into bonds and pushed rates lower. Instead, inflation fears are keeping yields elevated and mortgage rates unpredictable.
