Author: Eric BernsteinPublished:
Homebuyers and homeowners looking to refinance had another tough week last week. As the Iran War continues and oil supply constraints persist due to the Strait of Hormuz closure, the Fed and other central banks around the globe have started contemplating rate hikes to combat inflation concerns sending rates dramatically higher on the week! Again this could be a short term problem and we could see rates fall quickly IF oil supply can get back to normal levels.
The average rate on a 30-year fixed rate conventional loan jumped to 6.35%, up from 5.9% on March 2nd in just 3 weeks. Hopefully, we see a turnaround. See what rates we're offering by signing up for our Friday rate texts.
Our LendFriend Learning Center now has over 230 articles to help homebuyers buy with confidence. Check out our top articles of the week at the bottom of this email.
The March Fed Meeting
The Federal Reserve held its benchmark interest rate steady at 3.5%–3.75% at its March meeting, and the message from Chair Jerome Powell was straightforward: nobody knows what comes next. Powell used some form of the word "uncertain" more than half a dozen times during his press conference, acknowledging that forecasting the economic impact of the Iran War is nearly impossible. The dot plot pointed to one cut this year and another in 2027, but the range of individual projections was so wide that Fed officials themselves have very little agreement on the path ahead.
One notable development: Powell confirmed he isn't going anywhere yet. He said he'll stay on as a "chair pro tem" until his presumed successor, former Governor Kevin Warsh, is confirmed by the Senate. Powell also pushed back firmly on stagflation fears, arguing that despite inflation running above target for nearly five years and a sluggish hiring environment, conditions today bear little resemblance to the 1970s. The bottom line for homebuyers and homeowners: the Fed is in a holding pattern, watching the data and the war closely before making any moves — which means mortgage rates are likely to stay volatile and sensitive to every new headline out of the Middle East.
Central Banks Start Thinking About Rate Hikes
The Iran War is rapidly reshaping interest rate expectations on both sides of the Atlantic. In Europe, the ECB held its key rate steady at 2% at its March meeting, but the outlook has shifted dramatically as surging oil prices reignite inflation fears. J.P. Morgan, Morgan Stanley, and Barclays all revised their forecasts to anticipate future hikes after ECB President Christine Lagarde warned of a significantly more uncertain outlook, with Barclays and J.P. Morgan now penciling in as many as three 25 basis point hikes in April, June, and July — a move that would bring the ECB's deposit rate to 2.75% by year-end.
What happens in Europe also has an impact on the US. Here, the shift has been equally striking. As recently as last month, markets expected as many as two Fed rate cuts by year-end, but that narrative has completely reversed as the Iran conflict escalated. Fed Chair Jerome Powell signaled that inflation risks now outweigh labor market concerns, and even the typical rate cut advocate, Fed Governor Christopher Waller, said the risk of persistent inflation convinced him to hold rates rather than cut. Markets now think the chance we'll see a hike are as good as the chances the Fed will cut.
Wholesale Inflation (PPI) Comes in Hot
February's wholesale inflation data came in well above expectations, adding more fuel to the rate hike conversation. The producer price index rose a seasonally adjusted 0.7% on the month — more than double the 0.3% economists had forecast — and climbed 3.4% on a 12-month basis, the highest reading since February 2025. Core PPI, which strips out food and energy, rose 0.5% monthly and 3.9% annually. Food prices jumped 2.4% and energy rose 2.3%, while fresh and dry vegetables soared nearly 49% (ouch). Following the report, stock futures slipped and Treasury yields rose, with futures traders pushing out expectations for the next Fed rate cut to at least December.
What makes this report particularly concerning is that it doesn't yet reflect the oil price surge driven by the Iran conflict. The U.S. and Israel have continued striking targets in Iran, sending oil prices soaring to around $100 a barrel — up more than 70% year to date. The PPI data is a leading indicator of consumer prices, meaning the pipeline inflation pressures we're seeing today are likely to work their way through to everyday prices in the months ahead. Combined with a core PCE reading already at 3.1% and consumer prices rising at a 2.4% annual rate, the inflation picture is becoming increasingly difficult for the Fed to look past.
Pending Home Sales: A Bright Spot With a Big Asterisk
There was one piece of good news for the housing market last week, as pending home sales rose 1.8% — much better than the expected 0.5% decline — likely due to mortgage rates that were much lower a few weeks ago. The improvement was broad-based, with contracts rising in the West, South, and Midwest, and suggested the spring selling season was shaping up to be more active than feared. That momentum, however, has already run into a wall. As the Middle East conflict escalated and oil prices surged, mortgage rates reversed course and climbed back to 6.11%, erasing much of the affordability progress that had sparked buyer activity in the first place.
The bigger picture for housing remains challenging. Builders haven't ramped up construction due to expensive materials from tariffs, labor shortages from immigration policy changes, and a glut of unsold new homes already on the market — with housing starts falling to roughly 943,000 units in 2025, down from over 1 million the year prior. House prices are still expected to rise nearly 2% this year.
What to expect this week?
Before diving into the economic calendar, it's worth noting the elephant in the room: any and all of the data and Fed speak below can be instantly overshadowed by a single headline out of the Middle East. We've seen it happen repeatedly over the past few weeks — one tweet, one airstrike, one ceasefire rumor is all it takes to send oil prices and mortgage rates swinging in either direction.
Monday has Fed Governor Stephen Miran making a TV appearance alongside Chicago Fed President Austan Goolsbee, followed by a delayed construction spending report.
Tuesday brings a revision to Q4 productivity and the S&P flash PMI readings for both services and manufacturing, which will give markets a fresh read on economic momentum.
Wednesday's import price index will be closely watched for signs of inflation seeping in through trade channels.
Thursday is the busiest day for Fed speak, with Governors Lisa Cook, Stephen Miran, and Michael Barr all scheduled, plus Vice Chair Philip Jefferson — any comments touching on the Iran conflict or the rate outlook could move markets.
Friday has final read on consumer sentiment for March, expected to come in around 54, well below February's 55.5 — a level that already reflected growing unease among American households.
This Week's Top Learning Center Articles
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What to Look for in a New Jersey Mortgage Broker for High-Value Properties
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