The election of Donald Trump coincided with a gradual rise in mortgage rates, which had been at near record-low levels for much of 2016.
But in recent weeks, rates have started trending down again. In part, you can thank rising tensions in the Middle East and the Korean Peninsula.
According to The Motley Fool, a financial website, the average 30-year fixed-rate mortgage rate dropped to 3.87% to start the third week of April. That's down from 4.19% just a month ago.
While it is true that the Federal Reserve has hiked the Federal Funds Rate twice since December, that's not what affects mortgage rates. The Fed's rate makes borrowing more expensive for banks, but not necessarily for home buyers.
10-year Treasury note
Mortgage rates are closely tied to the yield, or interest rate, on the Treasury's 10-year bond. The more investors there are who want to buy those bonds, the less the government has to pay in interest.
Since the 10-year note is among the safest investments in the world, when geopolitical tensions heat up, investors snap up 10-year bonds. The rate on the 10-year note is near the lowest point since Trump's election, falling further after the U.S. attack on a Syrian Airbase and the movement of a U.S. Navy task force to the Korean Peninsula.
When Trump told The Wall Street Journal he thought the U.S. dollar was too strong, the greenback immediately fell, prompting more bond-buying and sending yields even lower.
Even as early as March, falling mortgage rates drew home buyers off the sidelines. The Mortgage Bankers Association reports mortgages for home purchases rose 6.7% last month, compared to a year earlier.
What could send mortgage rates higher again? Whatever causes bond rates to rise. If investors are confident of safely getting a higher rate of return somewhere else, they are less likely to buy bonds.
The fact that demand for Treasury bonds is rising, analysts say, suggests some concern among investors that other assets, such as stocks, might not be as safe right now.
Home mortgage deduction in cross-hairs?
Another factor that could make mortgages more expensive, though it has nothing to do with interest rates, is the elimination of the mortgage interest deduction. The deduction allows homeowners to write off their mortgage interest and has the effect of making their house payment less costly.
For the first time, there is serious talk among policymakers in Washington about eliminating the deduction, which has been strenuously defended over the years by the real estate industry.
Fair housing advocates have stepped up attacks on the deduction, saying it benefits the affluent at the expense of the poor. The Columbus Dispatch reports the tax break is losing support on both sides of the aisle.
The National Low Income Housing Coalition is backing legislation in the House that makes what it calls "modest" changes to the mortgage interest deduction, redirecting the money to support affordable housing.
If you're thinking of buying a home or refinancing your current home, you'll find thousands of reviews from consumers and experts in the ConsumerAffairs Mortgage Buyers Guide.