Iran Conflict Drives US and UK Mortgage Rates to Yearly Highs

Mortgage rates in the United States and United Kingdom have surged to nearly 12-month highs in July 2026, driven by geopolitical instability and rising energy costs. The benchmark 30-year fixed mortgage rate in the U.S. rose to 6.58% by July 24, while 15-year rates climbed to 5.96%. In the UK, average two-year fixed deals reached 5.59% and five-year deals hit 5.6% during the same period.

Freddie Mac and other financial trackers attribute the climb to rising 10-year Treasury yields, which hit 4.7% by late July. The primary catalyst is the ongoing military conflict with Iran and Houthi attacks on Red Sea tankers, which pushed crude oil prices to $100 a barrel. This surge in energy costs reignited inflation fears, with U.S. inflation climbing from 3.3% in March to 4.2% in June 2026.

In the UK, major lenders including HSBC, Barclays, and Santander increased borrowing rates, while over 100 deals were temporarily withdrawn from the market. The Bank of England Financial Policy Committee now projects that five million homeowners will face increased monthly repayments by the end of 2028, an increase from previous estimates.

In the U.S., the Federal Reserve faces pressure to raise short-term interest rates to combat inflation. This environment, combined with record-high home prices, has stagnated home sales and increased mortgage foreclosures, particularly in Florida. Borrower demand has declined significantly, with mortgage applications seeing a 7% weekly drop in mid-July.