Mortgage rates just had their best week in over a month. The average 30-year fixed loan fell to 6.47%, down from 6.52% a week ago and 6.81% a year ago.
The average 15-year loan also eased to 5.81%, down from 5.84% the week before. Both moves point to softer borrowing costs for buyers heading into summer.
Mortgage rates ride the 10-year Treasury yield like a sidecar. Where it goes, they follow.
The 10-year sat near 4.45% on Friday. It has been falling on news that a U.S.-Iran ceasefire is finally taking shape.
President Trump signed a deal with Iran on June 17 in France. It calls for an end to fighting, a reopen of the Strait of Hormuz, limits on Iran's uranium stockpile, and a 60-day window to settle a long-term plan.
The deal also eases pressure on Tehran by freeing up some frozen assets and lifting some limits. Some conservatives argue it gives up too much without forcing Iran to dismantle its nuclear program right away.
Less war risk means less reason to dump Treasuries. Investors buy them instead, and that pulls yields down.
When yields fall, mortgage rates ease with them.
"Incoming data continues to reflect a resilient consumer, with retail sales improving and pending home sales strengthening," said Sam Khater, chief economist at Freddie Mac. He added that purchase demand is also nudging higher.
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The Fed voted 12-0 Wednesday to leave the federal funds rate - the rate banks charge each other for overnight loans, which sets the floor for most borrowing - at 3.5% to 3.75%. The bigger move was how new Fed Chair Kevin Warsh handled it.
Warsh gutted the forward guidance markets have leaned on for years. His first FOMC statement ran about 130 words, less than half the length of recent ones.
The message was simple. The Fed will not telegraph its next move, and investors should not expect a roadmap.
Markets read that as hawkish. The 10-year Treasury popped after the news, and odds of a rate hike before year-end climbed alongside it.
Anthony Smith of Realtor.com said the new approach is "ultimately the path to lower long-term rates." But in the near term, he warned, markets without clear guidance "may demand a premium."
That premium would show up directly in mortgage rates if Treasury yields rise on hike bets.
Buyers should not assume the relief will last. The Iran deal still has to hold, and the Fed still has to deliver on price stability.
Both forces will tug at mortgage rates in opposite directions for the rest of the year.
Right now Iran is winning the tug-of-war.
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