Mortgage Rate Predictions: Will Military Conflict, Tariffs and the Fed Keep Rates High?
Tharon Green/CNET
The housing market is hardly immune to political and economic volatility, yet mortgage rates have been eerily calm over the last period. Since the spring, the average rate for a 30-year fixed mortgage has moved in a mostly narrow range around 6.8% and 7%.
Mortgage rates were expected to gradually improve in 2025. However, the Trump administration's inflationary tariffs, deficit spending and geopolitical maneuvering led to bleaker forecasts, including fewer interest rate cuts by the Federal Reserve.
The Mortgage Bankers Association now predicts that mortgage rates will decline only slightly to 6.7% by the end of the year.
"You'd need to see mortgage rates pretty far below current levels, certainly below 6.75%, to incentivize homebuyers," said Beth Ann Bovino, chief economist at U.S. Bank.
Economists were also monitoring how a war in the Middle East could spark fresh volatility across global markets, significantly affecting oil prices and the US dollar, which would have a ripple effect on long-term Treasury yields and mortgage rates.
However, with the Israel-US-Iran ceasefire holding steady for now, rates haven't undergone major fluctuations. Logan Mohtashami, lead analyst of Housing Wire, said that traders mostly saw the bombing of Iran's nuclear facilities as a short-term event, muting the impact on mortgage rates.
In the coming weeks, housing market experts will be assessing the potential for another military escalation, oil prices and how the Fed responds to labor market data and recession risks. If any of these variables lead to a downward trend in home loan rates, more buyers may come off the sidelines.
CNET
Fed interest rate cut still projected for fall
Despite widespread pleas for lower consumer borrowing costs, including from the White House, the Fed held interest rates steady for the fourth consecutive time this year at its monetary policy meeting on June 18.
While two Fed officials this week floated the possibility of a July cut, the market largely projects an interest rate cut in September. Fed Chair Jerome Powell has reaffirmed a "wait and see" posture, with concerns over the inflationary impact of tariffs.
The Fed is tasked with maintaining maximum employment and containing inflation, primarily through setting its short-term benchmark interest rate for lenders. A sluggish economy typically warrants interest rate cuts to stimulate growth, but lowering rates too quickly could fuel price growth when inflation is still above target.
Monetary policy changes by the Fed influence overall borrowing rates, though it's not a one-to-one relationship with home loans. In 2024, the central bank cut interest rates three times, but mortgage rates didn't fall.
Mortgage rates are primarily driven by movement in the bond market, specifically the 10-year Treasury yield. Bond yields and interest rates rise or fall depending on how inflation and labor data shift investor speculation and risk assessment.
How war and tariffs impact mortgage rates
Since mortgage rates are highly sensitive to fiscal policy and supply chain shocks, a global trade war and a military war with Iran could impact the direction of mortgage rates in either direction.
For example, if inflation increases due to tariff policies or a surge in energy costs, mortgage rates could increase.
"Even though many of the tariffs are in place, some of the big ones have yet to take effect," said Bovino. The average household in the US is expected to lose about $3,000 in income from tariffs, with lower-income households getting hit even harder, according to Bovino.
Conversely, a prolonged conflict in the Middle East could also spark fear of a downturn and propel investors to buy government-backed investments like US Treasury bonds. During heightened geopolitical turmoil, increased demand for "safe-haven" bonds can drive prices up and yields down, temporarily pushing mortgage rates lower.
However, a brief confrontation of air strikes is not the same as a sustained battle with boots on the ground, according to Matt Graham of Mortgage News Daily. The bigger the US involvement, the higher the implications for the market.
"While it's true that major geopolitical conflicts historically have a positive connotation for interest rates, that reaction can be tempered or even counteracted by a variety of factors," Graham said in an email. If the geopolitical conflict has a negative impact on inflation due to a spike in oil prices, for example, that can offset bond demand.
Coping with an unaffordable housing market
Major affordability challenges resulted in another inactive spring homebuying season. Even as the long-standing housing shortage eases in several local markets and gives some buyers improved negotiating power, the rest remain locked out by steep home prices.
"Prices are still incredibly high," Bovino said. "Add to that the borrowing costs of a mortgage, and it's prohibitively expensive for most people to get into the housing market." Plus, with recession risks still on the horizon, people who are nervous about finances will be more reluctant to take on mortgage loan debt.
Prospective buyers waiting for mortgage rates to drop may soon have to adjust to the "higher for longer" rate environment, with mortgage rates fluctuating between 5% and 7% over the longer term.
While market forces are out of your control, there are ways to make buying a home slightly more affordable. Last year, nearly half of all homebuyers secured a mortgage rate below 5%, according to Zillow.
Here are some proven strategies that can help you save up to 1.5% on your mortgage rate.
💰 Build your credit score. Your credit score will help determine whether you qualify for a mortgage and at what interest rate. A credit score of 740 or higher will help you qualify for a lower rate.
💰 Save for a bigger down payment. A larger down payment allows you to take out a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% will also eliminate private mortgage insurance.
💰 Shop for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you negotiate a better rate. Experts recommend getting at least two to three loan estimates from different lenders.
💰 Consider mortgage points. You can get a lower mortgage rate by buying mortgage points, with each point costing 1% of the total loan amount. One mortgage point equals a 0.25% decrease in your mortgage rate.
Now Playing: 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More
02:31
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Insider
24 minutes ago
- Business Insider
Weak Fundamentals Facilitate Shrewd Options Trade on Intel Stock (INTC)
On the surface, semiconductor giant Intel (INTC) presents a risky narrative. Sure, INTC stock gained 14% since the start of the year, an impressive performance given that the benchmark S&P 500 is up around 5% during the same period. However, over the past 52 weeks, the security has declined by more than 26%, which is well below that of semiconductor leaders like Nvidia (NVDA). Don't Miss TipRanks' Half-Year Sale Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. Adding to the complex narrative, tense relations between the U.S. and China cloud the fundamental case for INTC stock. Recently, President Donald Trump has stepped up export controls to block the Asian juggernaut's access to advanced semiconductors. Combined with the Trump administration's tough trade policies, particularly regarding tariffs, the situation is challenging for Intel. Last year, China accounted for 29% of Intel's revenue, exposing the company to foreign policy dynamics. Still, bullish investors may be able to read between the lines. Although Trump's tariffs have rattled Wall Street, he has also consistently backed off from going full bore. Impolitely, this back-and-forth process has earned the president the nickname 'TACO' — 'Trump always chickens out,' they say. From a practical perspective, the cloud hanging over INTC stock may be a Bullish opportunity, as there's reason to believe that cooler heads will (eventually) prevail. To amplify gains from this speculative position, traders may consider diving into the options market. The Art of Probability Helps Investors Capitalize on INTC While scrolling through various financial publications can provide color and context for a particular enterprise, this approach lacks specificity. Options traders require a thesis to cover not only the magnitude component (y-axis) but also the time element (x-axis). Being correct on one but not the other leads to a suboptimal transaction, to put it mildly. Stated differently, traders must view the market in probabilistic terms, and it's here that the game of blackjack — and the concept of card counting — becomes supremely relevant. Professional blackjack players will keep a running count of the card values dealt. Low cards are assigned a value of +1, neutral cards are assigned a value of 0, and high cards are assigned a value of -1. Essentially, the idea is to raise one's bet when the odds favor the player and reduce bets when the odds favor the dealer. When done correctly, this approach provides a slight but tangible edge for the card counter, making it a superior framework compared to simply guessing randomly. However, making the strategy work requires a player to calculate two types of probabilities: derivative and conditional. The baseline success ratio is derived from the Gaussian (or standard) distribution, which indicates the likelihood of success based on all aggregate hands. However, the Markovian (or conditional) odds show the possibility of success for a specific hand. It's possible to apply this same game-theory logic to the stock market but with a catch: it's difficult, if not impossible, to conduct Markovian analyses on continuous scalar signals like stock prices. Therefore, this metric should be converted into discrete states, just like how a pro blackjack player would approach the problem. Subsequently, this is the reason why market breadth — or t he sequence of accumulative and distributive sessions — is such a vital measurement metric. As a representation of demand, market breadth is effectively binary, facilitating easy categorization and quantification. These attributes serve as the backbone of past analogs for the formulation of probabilistic analysis. Plotting a Bullish Trading Strategy for INTC Stock With Tuesday's solid performance, INTC stock is on track this week to print a 6-4-U sequence: six up weeks, four down weeks, with a positive trajectory across the 10-week period. Admittedly, converting INTC's price action into a simple binary sequence compresses its magnitude dynamism. Still, the benefit to the trader is that the process segregates price action into distinct, discrete behavioral events. These events can then be tracked to determine transitional probabilities. For instance, using the above approach, the trader can identify that the 6-4-U sequence has flashed 46 times since January 2019. In 56.52% of cases, the price action for the following week (which would coincide with the business week beginning July 7) results in upside, with a median return of 2.47%. Assuming INTC closes around $23 by the end of this week, if the implications of the 6-4-U sequence materialize, the security could reach around $23.57 relatively quickly. And if the bulls maintain control of the market, a push toward $24 over the next few weeks wouldn't be out of the question. Finally, what makes this setup so intriguing is that, as a baseline, the chance that INTC stock will rise on any given week is only 51.03%. Therefore, an incentive exists to consider a debit-based options strategy. Based on the market intelligence above, an aggressive yet rational trade would be the 22.50/23.50 bull call spread, expiring on July 18. This transaction involves buying the $22.50 call and simultaneously selling the $23.50 call, for a net debit paid of $52, representing the maximum potential loss in the trade. Should INTC stock rise through the short strike price ($23.50) at expiration, the maximum reward is $48, a payout of over 92%. Is Intel a Buy, Sell, or Hold? Turning to Wall Street, INTC stock has a Hold consensus rating based on one Buy, 26 Holds, and four Sell ratings over the past three months. The average INTC stock price target is $21.30, implying a downside risk of 6.78% over the next year. Harnessing Mathematical Probability to Trade Intel Stock While Intel's fundamentals may not appear especially compelling at first glance, the political backdrop may prove less detrimental than many fear. Adding to the bullish case for INTC stock is a statistical perspective: given the nature of Intel's demand profile, there's a reasonable basis for expecting potential upside. For bullish speculators, this could present an interesting opportunity in the options market.
Washington Post
25 minutes ago
- Washington Post
Takeaways from AP report on company that sold 200,000 carbon credits to remove CO2 from ocean
Formed three years ago, Gigablue says it has designed particles that when released in the ocean will trap carbon at the bottom of the sea. Gigablue says its work will do nothing less than save the planet. But outside scientists frustrated by the lack of information released by the company say serious questions remain about whether the technology works as the company describes. Their questions showcase tensions in an industry built on little regulation and big promises . Here are highlights from The Associated Press' reporting : Gigablue, founded by a group of entrepreneurs in Israel, was originally named 'Gigaton' after the one billion metric tons of carbon dioxide most scientists say will be necessary to remove from the atmosphere each year to slow global warming. The company began trials in the South Pacific Ocean last year, and says it will work with country authorities to create a 'sequestration field' — a dedicated part of the ocean where 'pulses' of particles will be released on a seasonal basis. The company announced earlier this year that it reached a historic milestone: selling 200,000 carbon credits. It's the largest sale to date for a climate startup operating in the ocean, according to the tracking site making up more than half of all ocean-based carbon credits sold last year. Carbon credits, which have grown in popularity over the last decade, are tokens that symbolize the removal of one metric ton of carbon dioxide from the atmosphere. On paper, companies that buy credits achieve a smaller carbon footprint without needing to reduce their own emissions — for instance, by paying another vendor to plant trees or capture carbon dioxide from the air . Only a few countries have required local industries to purchase carbon credits. Most companies that buy them do so voluntarily. The credits have helped fund a band of startups like Gigablue that are eager to tackle the climate crisis, but they are also unevenly regulated, scientifically complex, and have in some cases been linked to fraud . Gigablue's 200,000 credits are pledged to SkiesFifty, a newly formed company investing in greener practices for the aviation industry. Gigablue wouldn't reveal what it earned in the sale, and SkiesFifty's team declined to be interviewed. Most credits are sold for a few hundred dollars each — but a chart on Gigablue's website suggests its prices are lower than almost any other form of carbon capture on the market. The particles Gigablue has patented are meant to capture carbon in the ocean by floating for a number of days and growing algae, before sinking rapidly to the ocean floor. Algae has long been attractive to climate scientists because it absorbs carbon dioxide from the surrounding water as it grows. If the algae sinks to the deep sea or ocean floor, Gigablue expects the carbon to be trapped there for hundreds to thousands of years. The ultimate goal is to lower carbon dioxide levels so drastically that the ocean rebalances with the atmosphere by soaking up more CO2 from the air. It's a feat that would help slow climate change, but one that is still under active study by climate scientists. While Gigablue has made several commercial deals, it has not yet revealed what its particles are made of. Partly this is because the company says it will build different particles tailored to different seasons and areas of the ocean. 'It's proprietary,' said chief technology officer Sapir Markus-Alford. Documents provide a window into the possible ingredients. According to information on the permit, Gigablue's first New Zealand trial last year involved releasing particles of pure vermiculite, a porous clay often used in potting soil. In the second New Zealand trial, the company released particles made of vermiculite, ground rock, a plant-based wax, as well as manganese and iron. A patent published last year hints the particles could also be made of scores of other materials, including cotton, rice husks or jute, as well as synthetic ingredients like polyester fibers or lint. The company said it had commissioned an environmental institute to verify that the particles are safe for thousands of organisms, including mussels and oysters. Several scientists not affiliated with Gigablue interviewed by the AP said they were interested in how a company with so little public information about its technology could secure a deal for 200,000 carbon credits. The success of the company's method, they said, will depend heavily on how much algae grows on the particles, and the amount that sinks to the deep ocean. So far, Gigablue has not released any studies demonstrating those rates. Thomas Kiørboe, a professor of ocean ecology at the Technical University of Denmark, and Philip Boyd, an oceanographer at the University of Tasmania who studies the role of algae in the Earth's carbon cycle, said they were doubtful algae would get enough sunlight to grow inside the particles. It's more likely the particles would attract hungry bacteria, Kiørboe said. The rates at which Gigablue says its particles sink — up to a hundred meters (yards) per hour — might shear off algae from the particles in the quick descent, Boyd said. It's likely that some particles would also be eaten by fish — limiting the carbon capture, and raising the question of how the particles could impact marine life. Boyd is eager to see field results showing algae growth, and wants to see proof that Gigablue's particles cause the ocean to absorb more CO2 from the air. In a statement, Gigablue said that bacteria does consume the particles but the effect is minimal, and its measurements will account for any loss of algae or particles as they sink. The company noted that a major science institute in New Zealand has given Gigablue its stamp of approval. Gigablue hired the National Institute of Water and Atmospheric Research, a government-owned company, to review several drafts of its methodology. In a recent letter posted to Gigablue's website, the institute's chief ocean scientist said his staff had confidence the company's work is 'scientifically sound' and the proposed measurements for carbon sequestration were robust. — This story was supported by funding from the Walton Family Foundation. The AP is solely responsible for all content. __ Contact AP's global investigative team at Investigative@ or
Yahoo
33 minutes ago
- Yahoo
Ocean Sky International (Catalist:1B6) Might Have The Makings Of A Multi-Bagger
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Ocean Sky International (Catalist:1B6) and its trend of ROCE, we really liked what we saw. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Ocean Sky International: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.023 = S$1.3m ÷ (S$67m - S$11m) (Based on the trailing twelve months to December 2024). Therefore, Ocean Sky International has an ROCE of 2.3%. Ultimately, that's a low return and it under-performs the Construction industry average of 9.1%. See our latest analysis for Ocean Sky International While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Ocean Sky International. We're delighted to see that Ocean Sky International is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 2.3% on its capital. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return. To bring it all together, Ocean Sky International has done well to increase the returns it's generating from its capital employed. And since the stock has fallen 33% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified. If you want to continue researching Ocean Sky International, you might be interested to know about the 2 warning signs that our analysis has discovered. For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity. — Investing narratives with Fair Values Suncorp's Next Chapter: Insurance-Only and Ready to Grow By Robbo – Community Contributor Fair Value Estimated: A$22.83 · 0.1% Overvalued Thyssenkrupp Nucera Will Achieve Double-Digit Profits by 2030 Boosted by Hydrogen Growth By Chris1 – Community Contributor Fair Value Estimated: €14.40 · 0.3% Overvalued Tesla's Nvidia Moment – The AI & Robotics Inflection Point By BlackGoat – Community Contributor Fair Value Estimated: $384.84 · 0.2% Overvalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
