Mortgage rates in the U.S. jumped this week to the highest level in three months, as the Iran war fans inflation fears and puts pressure on the U.S. housing market.
The 30-year fixed mortgage rate rose to 6.22% in the week ending March 19, up from 6.11% the previous week, according to Freddie Mac.
Economists note that current borrowing costs remain well below the 6.67% rate on a conventional 30-year loan a year ago. Still, the latest uptick is a discouraging sign for house hunters as the spring buying season kicks off. In late February, mortgage rates fell below 6% for the first time since September 2022.
“Elevated uncertainty could once again sideline both buyers and sellers, echoing the hesitant market conditions seen last year,” Anthony Smith, senior economist at Realtor.com, told the Associated Press.
Mortgage applications fell nearly 11% last week from the previous week, according to the Mortgage Bankers Association. New Census Bureau data also show that sales of new single-family homes dropped nearly 18% in January from the previous month and are down 11.3% from January 2025.
Iran war impact
The 30-year fixed mortgage rate has climbed since the conflict in the Middle East began in late February. The war has tightened global energy supplies, raising oil prices and injecting uncertainty into financial markets.
The 10-year Treasury yield, which influences the direction of mortgage rates, was at 4.26% on Thursday afternoon, up from 3.96% before the war started. As long-term bond yields rise, that pushes up mortgage rates.
“Rising energy prices and renewed trade uncertainty have lifted inflation expectations, putting upward pressure on longer-term interest rates and, in turn, mortgage rates,” Realtor.com senior economist Anthony Smith said in a blog post.
Mortgage rates are also indirectly influenced by the Federal Reserve’s interest rate decisions, which impact the broader lending environment. The central bank doesn’t set mortgage rates, but its decisions to raise or lower its short-term rate are watched closely by bond investors and can affect the yield on 10-year Treasury.
The Fed decided this week to hold rates steady as it assesses the impact of the Iran war, while also signaling that it could move to lower rates at least once this year.
However, some Wall Street analysts have cast doubt on that. EY-Parthenon chief economist Gregory Daco said in a report that it’s “entirely plausible that the Fed won’t deliver any rate cuts this year.”