Mortgage rates continued to move lower this week as financial markets digested the latest geopolitical activity, but a number of factors could prompt investor fears to rise again this week.

Mortgage News Daily reported Monday that 30-year fixed rates averaged 6.30%. That was down 9 basis points from a week earlier and 57 bps lower than a year ago. MND based its rates on best-execution pricing from lender rate sheets.

At HousingWire‘s Mortgage Rates Center, 30-year conforming loan rates averaged 6.42% on Tuesday, down 5 bps from one week ago. Rates for 30-year loans through the Federal Housing Administration (FHA) dropped 3 bps to 6.15% and rates for jumbo loans fell 4 bps to 6.29%.

The recent downward movement in rates is being driven in part by a ceasefire in the U.S.-Iran conflict, but that agreement is set to expire Wednesday. Multiple outlets say that an extension of the ceasefire is unlikely, with The Associated Press reporting that mediators are meeting in Pakistan and leaders of both countries are prepared to resume military action. Interest rates could rise again if a truce does not materialize.

While the Federal Reserve meets again next week, a rate cut is all but off the table. Investor sentiment and rates are more likely to move in tandem with Tuesday’s Senate hearing for Kevin Warsh — President Donald Trump‘s choice to replace Jerome Powell as the central bank’s chair. The Fed’s two-day meeting that concludes April 29 will be Powell’s last in charge.

Measured return to the market

Cooling rates during the ceasefire have had a positive impact on home purchase and refinance demand, with the Mortgage Bankers Association (MBA) reporting last week that total applications were up 1.8% on a weekly basis, led by a 5% jump in refi applications.

“Mortgage applications increased modestly as a decline in mortgage rates led to a boost in activity for the first time in five weeks,” Bob Broeksmit, the MBA’s president and CEO, said in a statement. “Refinances were up on a weekly and annual basis, but purchase activity remains subdued, with applications below year-ago levels for the second straight week as economic uncertainty and affordability pressures continue to affect homebuyer demand.”

Kyle Bass, production business manager at Refi.com — an affiliate of Mortgage Research Center and Veterans United Home Loans — said that the “modest” declines in rates have been enough to catch the attention of prospective borrowers.

“Homeowners are beginning to re-engage after a period of waiting on the sidelines. This isn’t a surge driven by urgency, but more of a measured return, where borrowers are reassessing their options and paying closer attention to how current rates compare to what they have today,” Bass said in a statement.

“At Refi.com, we’re seeing that shift play out in real time Borrowers aren’t rushing to act, but they are becoming more aware of the opportunity. If rates continue to trend in this direction, even gradually, this kind of early re-engagement can build into more meaningful refinance activity in the weeks ahead.”

‘More careful in pulling the trigger’

This week’s HousingWire Housing Market Tracker also shows positive growth in pending home sales, a leading indicator for closed transactions. Nationally, pending sales were up 6.4% week over week and 2% higher year over year.

On Tuesday, monthly data from the National Association of Realtors (NAR) showed more mixed results for March, with pending sales up 1.5% monthly but down 1.1% annually.

“Demand sensitivity to mortgage rates is greatest among first-time buyers, particularly younger buyers,” NAR chief economist Lawrence Yun said. “As a result, boosting supply and new-home construction should focus on smaller, more affordable homes.

“A good number of markets in the South experienced price cuts over the past year but recorded the strongest job growth,” Yun added. “That combination should lead to stronger housing market activity in the South this year.”

Bright MLS chief economist Lisa Sturtevant cautioned last week that spring housing market conditions appeared to be something of a “toss-up.”

“The ceasefire announcement earlier this month may have temporarily eased mortgage rates; however, right now, the outlook for the spring market is still unclear,” Sturtevant said. “Mortgage rates are probably going to remain volatile as there is still significant uncertainty about a long-term resolution of the conflict with Iran. In addition, inflation in March rose to 3.3% and this higher inflation, which was tied heavily to energy and global shipping, means lower rates are unlikely in the short term. 

“… New listings increased in March, signaling sellers are gearing up for the spring. However, we’re not sure if the higher inventory will be enough to entice buyers into the market. Higher rates continue to erode buyer purchasing power and uncertainty continues to give prospective buyers pause.” 

Melissa Cohn, regional vice president for William Raveis Mortgage, pointed to the University of Michigan’s consumer sentiment index for April as a cause for concern. It fell to a low point in the 70-year history of the survey. And these feelings are translating to a more measured approach to homebuying.

“People are much more careful in pulling the trigger,” Cohn says. “I have a large number of people who continue to extend their preapproval letters. … If you feel confident in your situation, and you see something that’s a good opportunity, and it’s a home that you want to have, and you’ll be sorry you missed out on it, then buy it now.”