Current mortgage rate situation
Mortgage rates jumped 11 basis points in a single week as the Iran war roiled markets. The 30-year fixed-rate mortgage averaged 6.11% on March 12, with ARM rates also climbing. The war is undoing recent progress in housing affordability.
Why ARM holders are at risk
The mechanism works like this:
- Iran war pushes oil prices above $100/barrel
- Higher oil revives inflation concerns
- Investors sell bonds, pushing Treasury yields higher
- Fed delays rate cuts (oil above $80 kills rate cut hopes)
- ARM reset rates follow Treasury yields upward
What ARM holders should consider
- Check your reset date: Know when your introductory rate period ends
- Calculate worst case: What would your payment be at current market rates?
- Consider refinancing to fixed: Lock in certainty while you can, though fixed rates are also higher
- Build a cushion: Save extra now in case your payment jumps at reset
- UK borrowers too: UK mortgage rates have surged past 5%, with forecasts of further increases
Who’s most vulnerable
Homeowners who took ARMs in 2024-2025 expecting rates to fall are most exposed. If the war persists and inflation stays elevated, their reset rates could be 1-2 percentage points higher than expected.
Sources: CNN, CNBC, Mortgage Professional