Iran Conflict Drives US Mortgage Rates to Nine-Month High

U.S. 30-year fixed-rate mortgages reached their highest levels since August 2025, with reports from the Mortgage Bankers Association and Freddie Mac placing rates between 6.53% and 6.65%. This surge is attributed to rising 10-year Treasury yields and inflation expectations triggered by the ongoing war in Iran, which has disrupted oil flows in the Persian Gulf and kept energy prices elevated.

Donald Trump stated he expects rates to decline following the swearing-in of Kevin Warsh as Federal Reserve chair. However, financial markets are pricing in a potential rate hike by year's end after consumer prices rose 3.8% in April. Market experts note that rates have climbed approximately 55 basis points since the start of the conflict.

Home-purchase activity has slowed, evidenced by an 8.5% drop in mortgage applications and a nearly one-year low in refinancing indices. Despite these pressures, pending home sales increased for three consecutive months, suggesting latent demand from buyers waiting for borrowing costs to fall. Analysts warn that rates may remain in the 6% range or climb toward 7% if the conflict is protracted, further eroding affordability as inflation offsets wage gains.