Global conflict has a way of rippling through every corner of the economy — and the U.S. housing market is no exception. Over the past several weeks, war-time economic pressures have driven energy prices sharply higher, with gas prices surging at pumps across the country. That inflationary momentum has spilled directly into the mortgage market, pushing rates noticeably higher in a relatively short period of time.
After briefly touching the high-5% range — a level that had offered some relief to buyers who had been sitting on the sidelines — mortgage rates reversed course and climbed back above the 6.5% threshold. This kind of volatility is driven in part by bond market reactions to geopolitical uncertainty, which tends to push investors toward or away from mortgage-backed securities depending on risk sentiment. When uncertainty runs high and inflation expectations rise, mortgage rates typically follow suit.
What makes this stretch particularly challenging is the speed of the move. A shift of more than half a percentage point in just five weeks can meaningfully change what a borrower qualifies for and how much a monthly payment looks like. For a market already dealing with affordability constraints — especially in high-cost states like California — this kind of rate movement adds another layer of difficulty for buyers and homeowners alike.
What This Means for California Homebuyers
California's housing market was already one of the most expensive in the nation before rates began climbing again. In major metro areas like Los Angeles, San Diego, the Bay Area, and Sacramento, median home prices remain well above national averages, which means even modest rate increases can translate into hundreds of dollars more per month on a typical mortgage payment. For buyers stretched thin by high purchase prices, that added cost could push some properties out of reach — at least temporarily.
That said, rising rates don't necessarily mean the market freezes entirely. Historically, some buyers choose to accelerate their purchase decisions when rates are climbing, hoping to lock in before conditions worsen further. Others may find that a softer pool of competing buyers gives them slightly more negotiating power than they would have had in a hotter market. The practical reality is that every buyer's situation is different, and affordability thresholds vary widely depending on income, credit profile, down payment, and the specific loan program being considered.
First-generation buyers and lower-to-moderate income households in California may find that government-backed loan programs — such as FHA loans with lower down payment requirements — remain a viable path forward even in a higher-rate environment. Down payment assistance programs available through California Housing Finance Agency (CalHFA) may also help offset some of the affordability pressure, depending on eligibility.
How This Could Affect Your Mortgage
First-Time Buyers: Rising rates typically reduce purchasing power, which means the loan amount you qualified for a few months ago may look different today. Working with a knowledgeable broker to explore FHA loans, conventional loans with private mortgage insurance, or CalHFA programs could help you find the most workable path to homeownership given current conditions.
Homeowners Considering a Refinance: If you currently hold a rate below 6%, a traditional rate-and-term refinance may not pencil out in today's environment. However, cash-out refinancing could still make sense for certain homeowners who have accumulated significant equity and need funds for home improvements, debt consolidation, or other financial goals — depending on your individual situation and long-term plans.
Real Estate Investors: Higher borrowing costs may compress margins on rental properties, particularly in California markets where cap rates are already thin. Investors evaluating new acquisitions may want to stress-test their numbers at current rates and potentially explore adjustable-rate mortgage (ARM) options or other financing structures that could offer lower initial payments, keeping in mind the risks associated with rate adjustments over time.
Frequently Asked Questions
Q: Should I wait for rates to drop before buying a home in California?
A: Timing the market is notoriously difficult, and waiting could mean competing against more buyers if rates do decline. Many financial professionals suggest that if you're financially ready and find a home that fits your needs and budget, the right time to buy is often when your personal circumstances allow for it — not purely based on rate forecasts.
Q: Can war-time economics cause mortgage rates to keep rising?
A: Geopolitical events can contribute to inflationary pressure and bond market volatility, both of which may push rates higher. However, rates are influenced by many factors, and movements in either direction are possible. Staying in close contact with a licensed mortgage broker can help you monitor rate trends and act when the timing may work in your favor.
Q: Are jumbo loans affected differently by these rate changes?
A: Jumbo loans — which are common in California given the state's high home prices — can sometimes move independently of conventional conforming loan rates. In periods of economic uncertainty, jumbo rate spreads may widen or tighten depending on lender appetite and secondary market conditions. Discussing your specific loan size and scenario with a broker is the best way to understand current jumbo pricing.
Navigating a shifting rate environment requires the right guidance and access to multiple lending options. At NetCORE Lending, we work with California buyers, homeowners, and investors to find mortgage solutions that may fit their individual financial situations — whether that involves FHA, VA, conventional, jumbo, or other loan products. Ready to understand what today's market means for your specific scenario? Contact NetCORE Lending today to get pre-qualified and take the next step with confidence. (NMLS# 1484338)
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