US Mortgage Rates Hit One-Year High as War and Inflation Fears Fuel Volatility

Mortgage rates in the US have reached their highest level in a year, driven by concerns over inflation and energy prices. The average 30-year fixed-rate mortgage now stands at 6.66 per cent, according to Freddie Mac.

This increase is attributed to the ongoing conflict with Iran, which has led to higher oil prices and increased investors' anxiety about inflation. LoanDepot chief economist Jeff DerGurahian notes that 'oil and inflation remain the biggest drivers, and mortgage rates will likely need energy prices to settle and inflation to remain under control before they can move meaningfully lower.'

The Federal Reserve's recent decision to hold its benchmark interest rate steady has also contributed to the uncertainty in mortgage markets. Three members of the Fed's rate-setting committee voted in favor of a hike, indicating that higher rates may be on the horizon.

The impact of this rate increase is already visible in weakening demand for home loans. Mortgage applications fell 6.4 per cent last week compared with the previous week, while refinance applications plunged by 10 per cent over the same period.