Hawaii Mortgage Market Update – March 2026

Each month, we bring you insights from one of the best in the business — Zack Diener of Barrett Financial Group, LLC — to help you stay informed and make confident, well-timed decisions in today’s ever-changing mortgage landscape.

From Three-Year Lows to Seven-Month Highs: The Whiplash Month

March delivered a masterclass in why timing the mortgage market is nearly impossible. After spending late February flirting with rates below 6% – matching the best levels we’d seen in more than three years – we’ve experienced a dramatic reversal that pushed rates back above 6.35%, the highest levels since last August. The culprit? A perfect storm of geopolitical turmoil, weak labor market data, and stubborn inflation that left the Federal Reserve trapped with no good moves available.

The Rate Rollercoaster

As of today, mortgage rates are averaging 6.36% for conventional 30-year fixed loans according to Mortgage News Daily’s daily survey of lenders. Here’s how we got here:

Late February: Rates dropped to 5.99% on February 23rd, matching the three-year lows from January 9th. Unlike that January spike driven by the Fannie/Freddie bond-buying announcement, this improvement felt sustainable — rates had eased down gradually over several weeks. The bond market had improved to its best levels since November, and the refinance pipeline was building.

Early March: Rates held steady in the low 6% range (5.98-6.05%). Markets seemed calm with no major catalysts.

Mid-March Explosion: Between March 9th and 12th, rates spiked to 6.40% before settling at the current 6.36%. The speed caught everyone by surprise.

According to Mortgage News Daily, rates experienced heightened volatility passing through the 6.25% level. Due to the mortgage market’s structure, 6.25% acts as a “dead zone” where movements amplify. When rates began rising from 6.125%, even moderate bond market weakness translated into a faster jump to the 6.375% zone.

The Iran War Changed Everything

The primary driver has been the escalating conflict between the United States, Israel, and Iran. After the assassination of Iran’s Supreme Leader on February 28th, retaliatory strikes sent oil prices soaring. Crude jumped roughly $6 per barrel in a single day during mid-March, and bond yields followed.

The mechanism is straightforward: higher oil means higher gas and diesel prices. Higher diesel means higher transportation costs. Higher energy costs translate into broader inflation. And inflation is kryptonite for mortgage rates.

The Fed acknowledged the uncertainty: “The implications of developments in the Middle East for the U.S. economy are uncertain.” Powell said it’s “too soon to know” the full impact but noted that “near term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices.”

Markets have become preoccupied with war-related headlines, often moving more on geopolitical news than economic data. Bond traders are making bets about how long the conflict will last and whether the resulting inflation will prove temporary or persistent.

The Jobs Picture: From Bad to Worse

February’s employment report was disastrous. The economy LOST 92,000 jobs when economists expected a gain of 50,000. Unemployment rose to 4.4%.

This marked the third monthly decline in five months. Key details:

• Healthcare lost 28,000 jobs (Kaiser Permanente strike)
• Leisure and hospitality shed 27,000 jobs
• Construction lost 11,000 jobs
• Federal employment down 330,000 (11%) since October 2024
• Long-term unemployment averaged 25.7 weeks – longest since December 2021
• Labor force participation fell to 62.0% – lowest since December 2021

December’s previously reported +50,000 was revised to -17,000. January’s 130,000 was revised down to 126,000.

From May 2025 through February 2026, the U.S. economy has lost 19,000 jobs on net. As one economist stated: “Companies are not hiring in the face of all of these headwinds and uncertainty.”

The Fed’s Impossible Position

At its March 17-18 meeting, the Fed left rates unchanged at 3.5-3.75% as expected. But the updated projections revealed how trapped they’ve become:

Inflation Outlook Worsening:

• 2026 inflation projection raised to 2.7% from 2.5%
• Core inflation also projected at 2.7%, up from 2.5%
• Both well above the Fed’s 2% target

Rate Cut Expectations:

• Still showing one cut in 2026, one in 2027
• BUT seven of 19 FOMC members now expect ZERO cuts in 2026 (up from six)
• Markets pricing first cut for September/October at earliest

Powell’s Dilemma:

Powell summed it up perfectly: “We are balancing these two goals in a situation where the risks to the labor market are to the downside, which would call for lower rates, and the risks to inflation are to the upside, which would call for higher rates.”

Translation: The labor market is terrible and getting worse (argues for cuts), but inflation is rising due to oil (argues for holding or hiking). The Fed is paralyzed.

Powell also announced he has “no intention of leaving the board until the investigation is well and truly over” – referring to the DOJ’s probe into the Fed’s headquarters renovation. He’ll likely remain as chair past his May 15th term expiration until Kevin Warsh is confirmed, which Senator Tillis is blocking until the DOJ investigation ends.

What Drove Rates Higher

Beyond geopolitics and jobs, specific factors combined to spike rates:

Producer Price Index: The March 18th PPI came in hotter than expected, including components that translate directly to consumer prices.

Oil Surge Continues: Bond markets have been tracking crude oil movements almost tick-for-tick.

Hawkish Fed Commentary: Multiple Fed officials emphasized inflation risks and the need for patience before cutting.

The Triple Hit: March 18th alone saw three rate increases. Morning PPI disappointment, midday oil surge, then Fed commentary. Lenders issued multiple “reprices” throughout the day – relatively rare and indicating how fast conditions were moving.

What This Means for Borrowers

The Reality Check:

We went from 5.99% to 6.40% in less than three weeks. On a $500,000 loan:

• At 5.99%: $2,996/month
• At 6.36%: $3,107/month
• Difference: $111/month, or nearly $40,000 over 30 years

This volatility demonstrates why timing the absolute bottom is impossible.

The Iran Factor:

The war’s trajectory will largely determine where rates go. If it de-escalates and oil falls, rates could drop back toward 6% or below. If it escalates or drags on, rates could push toward 6.5%+.

Nobody knows. Not Wall Street traders, not Fed economists, not geopolitical experts. Trying to time your mortgage around whether the war ends in two months or six is gambling.

The Fed Won’t Rescue You:

Don’t count on Fed rate cuts soon. They’re genuinely trapped. Earliest cut is September, more likely October/November. And there’s a real chance we get zero cuts in 2026.

Even if they do cut, remember: the Fed doesn’t control mortgage rates directly. Cuts might not translate into lower mortgage rates if inflation stays elevated.

Historical Perspective:

Yes, 6.36% is frustrating after seeing 5.99%. But remember:

• Rates were above 7.25% in early January 2025
• Rates hit 8% in late 2023
• Most of 2023-2024 saw rates in the 7-8% range

Anyone who bought at 7%+ over the past two years would still benefit from refinancing at 6.36%.

The Volatility Reality:

March proved rate windows open and close quickly. The sub-6% window lasted only days before geopolitical events slammed it shut.

Waiting for “perfect” conditions means missing “good” conditions entirely. Perfect can evaporate overnight due to events completely outside your control.

Action Items:

Locked in late February below 6%? Congratulations. Stay in touch with your lender about closing timelines.

Shopping now at 6.36%? Understand rates could go higher if Iran worsens or inflation disappoints. If you’ve found a home and the payment fits your budget, strongly consider locking. Don’t gamble on rates falling.

Current mortgage above 7%? Explore refinancing now. Even at 6.36%, you’d see meaningful monthly savings.

Pre-approved and house hunting? Stay in close contact with your lender. Your pre-approval amount can change as rates move.

Focus on what you control:

• Down payment amount
• Credit score
• Debt-to-income ratio
• Price you’ll pay
• Monthly payment you’re comfortable with

Don’t obsess over what you can’t control:

• Geopolitical events
• Fed policy
• Oil prices
• Bond market reactions

If the fundamentals work at today’s rates, move forward. If they don’t, wait until they do – but don’t wait simply hoping for better rates that may never come.

Looking Ahead

Geopolitical Developments: Any Iran war escalation or de-escalation will move rates quickly. Watch for ceasefire talks (rate-positive) or further military escalation (rate-negative).

Inflation Reports: The April 9th CPI is crucial. Has energy inflation spread to other categories? If yes, expect further rate pressure. If contained, we could see relief.

Employment Data: The March jobs report (April 3rd) will show whether February’s -92K was an aberration or a trend. Another loss could pressure the Fed to cut despite inflation.

Fed Leadership: Powell stays until the DOJ probe ends and Warsh is confirmed. Warsh is seen as more dovish but he’s only one vote.

Summer Outlook: Most forecasts suggest 6-6.4% range:

• MBA: 6.4% through Q4 2026
• Fannie Mae: ~6.0%
• NAR: ~6.0%
• Morgan Stanley: 5.5-5.75% if geopolitics stabilize

Nobody’s forecasting a return to 5% or a spike to 7%+ unless things go seriously wrong.

Most likely: rates bounce in a range rather than trending steadily. Spikes toward 6.5% on bad news, dips toward 6.0% on good news, long periods of stability in between.

The New Normal

We’re in an environment where rates are simply more volatile due to:

• Geopolitical instability
• Elevated baseline inflation
• Uncertain Fed policy
• Volatile energy markets
• Weakening but not collapsing labor market

This creates conditions where rates can move 30-40 basis points quickly based on news flow.

There may not be a “perfect” time to act. The sub-6% rates in late February looked perfect in hindsight, but nobody knew they’d disappear in days. Today’s 6.36% might look excellent if rates push to 7%, or expensive if they fall to 6%.

The Safest Approach:

Ask yourself:

• Do I need to buy/refinance now due to life circumstances?
• Do the payments work in my budget at today’s rates?
• Am I financially stable for this commitment?
• Is this the right move regardless of where rates go?

If yes, move forward. Rates might drop 0.25% in two months, but they might also rise 0.5%. You can’t know which.

The borrowers who do well aren’t the ones who perfectly time the market (nobody does). They’re the ones who make sound financial decisions based on fundamentals and actual needs, then execute when conditions are reasonable.

At 6.36%, conditions are reasonable – not perfect, not terrible, but reasonable. For many borrowers, that’s good enough to move forward.

Mortgage insights provided by Zack Diener, Barrett Financial Group

Zack Diener
Senior Loan Advisor
Mortgage Loan Originator | NMLS 470413
Based in Fort Collins, CO
Serving Colorado and Hawaii
(808) 349-3777 phone
(800) 385-3630 fax
ZDiener@barrettfinancial.com

Barrett Financial Group, LLC | Corp NMLS #181106
275 E Rivulon Blvd, Suite 200, Gilbert, AZ 85297