Mortgage Rates Are Rising Again — Here's What Happens Next

[00:01] mortgage interest rates. And as you know, the housing affordability crisis It's either one thing or another. It's either home prices rising much faster than wages, or it's the accelerating hidden costs of home ownership. And

[00:16] we're talking about association fees, insurance, property taxes, maintenance, repairs, etc. Or it's higher mortgage interest rates. Again, which is what I want to focus on today. Now, I want you to take a look at this.

[00:30] Federal Reserve. It shows where housing affordability currently stands. And I want to show you how to read it so that you can have some context. Okay, so you see this bar right here, which I've highlighted in red. If it's below that

[00:44] mark, then it represents that the housing situation is relatively affordable in the US. So, this chart shows the median income of a household in the US, the median price of a home in the US, and based on

[00:59] average mortgage interest rates, PMI, taxes, insurance, etc., it shows the average cost of owning a median priced home in the US. Okay, so if 30% of your income is going towards your housing expenses, then that's considered normal,

[01:13] line. If you're spending below 30% of your income on housing, then that's considered affordable. If you're above 30% of your income, then that's considered unaffordable. Now, I want to

[01:27] into 2006, right before the housing market crash, the average was that Americans were spending 44% of their income on housing, which is considered very unaffordable. Now, after the housing market crash

[01:41] during the GFC, it got down to Americans spending 25% of their income on housing. basically like the golden age of home ownership. Home prices were down,

[01:53] interest rates were 4% or below, and we didn't see any skyrocketing prices for those hidden costs that we're talking about such as property taxes or Now the most recent data provided by the Federal Reserve which is March of 2026

[02:08] shows that we're currently at 42% of income is going towards housing. And this is due to higher home prices, wage growth that has not been keeping up, higher interest rates and higher costs of maintaining a home.

[02:23] And you have to remember that being above 30% is not good. interest rates because they're the highest that they've been for a while. is it a good time to refinance right now?

[02:36] concerned that mortgage interest rates have been going up but they're concerned to go up even higher. And people have also been asking is it a good time to buy a home right now or should they wait because of higher

[02:49] mortgage interest rates? So let me show you this chart from the Federal Reserve. average interest rate on a 30 year fixed mortgage and it's updated weekly every Thursday. As of yesterday on Thursday the average

[03:02] interest rate was at 6.53% as of today on Friday it actually as of today on Friday it actually climbed higher to 6.6%. Now that's pretty high considering that 3 months ago it was actually below and

[03:16] as you can see it dipped below 6%. So from here where do mortgage interest rates go? Do they go higher or lower or do they stay range bound? Now to answer that very important question we have to take a look at the interest rates on the

[03:30] 10 year yield. That's because mortgage interest rates are correlated to the 10 notes. And as you can see year-to-date the interest rate on the 10 year yield has

[03:42] been climbing causing mortgage interest rates to follow higher. But of course the run-up started here due to the US-Iran conflict. yield is headed because that's going to determine where mortgage interest rates

[03:57] So, the reason why this 10-year yield started shooting up is because the US-Iran conflict jeopardizes the supply of energy. then almost everything's going to go up in price.

[04:11] Therefore, it's due to higher inflation expectations that this 10-year yield is going up. Now, I want to present to you three scenarios of how this plays out, and I'm going to give you my opinion on which I see as the most likely outcome.

[04:25] The first scenario is where the supply of energy continues to be disrupted. Energy prices go higher, causing inflation to go higher as well, and then mortgage interest rates are going to go up even more.

[04:38] Another scenario is if energy prices go down due to de-escalation of the war, decrease, and then mortgage interest rates will go down.

[04:50] Reserve's ability to decrease mortgage interest rates through their monetary Okay, so they can do this by cutting interest rates. Of course, the more that they cut, the more rates will go down. However,

[05:04] cutting interest rates does not have a direct impact on mortgage interest But the Federal Reserve, they can directly intervene by buying US Federal Reserve going out there and buying notes or bonds or MBS and causing

[05:19] mortgage interest rates to go down. And then, you have this possibility where mortgage interest rates remain range-bound. So, this could happen due to various opposing forces keeping us stuck in this

[05:31] range. Now, what do I mean by that? So, for example, let's just say that energy prices remain slightly elevated, so that's going to cause mortgage interest rates to remain elevated. So, if that happens, but the Federal Reserve

[05:44] interest rates, and they do that by easing their monetary policy, then you have a situation where you have one force causing interest rates to stay high, you know, elevated, and another force causing interest rates

[05:58] to decrease. So, you have the forces battling each other, and basically nothing happens. We just stay range bound. Now, it is my opinion that we're remainder of the year. So, listen, this is what I'm talking about. This is the

[06:10] average mortgage interest rate on a 30-year fixed for the past 5 years. For the past 4 years, we've been range bound from 6% to 8%. Currently, we're at 6.6%.

[06:22] Okay, so regardless of how long this war drags out, I believe that we're going to be in for higher inflation for the remainder of the year. And due to higher inflation expectations, we're going to have elevated mortgage interest rates.

[06:35] So, sure, it's possible that we go back down to 6%, maybe 5.5%, but it's not going to be anywhere close to 3% or sub-3%, which many people have obtained. But, of course, a big wild card is going to be

[06:49] what the Federal Reserve does with their monetary policy. And I say it's a big wild card because President Trump's new chair of the Federal Reserve, Kevin Reserve. And we don't know how much money that

[07:01] he's going to want to print, what he's going to want to do with interest rates, and what what he's going to buy or sell on the Federal Reserve's balance sheet. interesting thing. It's that the market is not expecting

[07:14] rates for the rest of the year. Now, this is according to the CME FedWatch tool. So, there's actually a 43.6% chance that the Federal Reserve will raise interest rates later this year. A 0% chance that

[07:28] year, and a 56.4% chance that they're not But, listen, I just want to make this clear distinction that interest rates by the Federal Reserve is one thing. Their money printing and balance sheet

[07:42] expansion, that's a separate topic. So, we're going to get a better idea of what Walsh wants to do at the next Federal Reserve meeting on June 17th. Now, with that being said, the expectation of mortgage interest rates

[07:54] being range-bounds near the six-ish to seven-ish percent, it is my belief that it is not a good time to refinance your mortgage interest rate right now. So, in my opinion, when there's a when there's a emergency

[08:11] action or I guess you can say a an emergency reaction by the Federal Reserve, and it temporarily plummets mortgage interest rates, then that's going to be the time to jump on the opportunity and lock in a much better

[08:23] interest rates for your mortgage. Now, in terms of buying a home, knowing that the housing situation is bad, how unaffordable it is, I still believe that the best time to buy a home was in the past. It was

[08:36] yesterday. It was pre-pandemic. It was 10 years ago. It was 20 years ago. All I'm saying is that it's better today than tomorrow. But listen, if you're an investor and you're trying to time the markets and

[08:50] trade homes like a stock, you know, then don't take my advice. This is This is not applicable here for that situation. But if you're going to buy a home as a primary residence and you're going to live in there for 5 years or more, it's

[09:03] my opinion that you're going to be better off buying today. equity rather than than trying to time the markets and miss out. But listen, buy something like you got to buy something right away. What I'm saying is

[09:17] that yes, you should be shopping even with this current situation, it's still a good time to go out there, be shopping, looking for a good deal. Just know that to buy my first home, it took me 11 months to find it.

[09:32] housing situation is going to get significantly better in terms of affordability in the near future. Because if interest rates go down going to go up substantially. It's going to be an inverse relationship. So,

[09:46] that's the current situation of mortgage interest rates and my perspective. And I understanding of what is going on. Please subscribe. Thank you for the support and wish you a very nice weekend. Take care.