Turmoil in the bond market, fueled by the war with Iran, is sending US mortgage rates higher and threatening to make buying a home even more expensive.
The average 30-year fixed-rate mortgage rose to 6.51% this week, reaching the highest level since August of last year, according to Freddie Mac.
It was the sharpest weekly increase in mortgage rates since April 2025, when the bond market suffered similar stress after President Donald Trump first announced his plans for sweeping, historic tariff increases on nearly all countries.
Mortgage rates loosely track the US 10-year Treasury yield, which is closely tied to inflation expectations. The yield, which moves in the opposite direction to bond prices, climbed sharply this week to the highest level in more than a year as investors grew increasingly worried that rising oil prices and the war in Iran could cause persistently higher inflation.
Prices rose 3.8% in April, the highest level since May 2023, according to the latest Consumer Price Index data released last week. For the first time in three years, Americans’ wages didn’t outpace inflation, according to the report.
Before the outbreak of the Iran war, average mortgage rates briefly dropped below 6% for the first time in more than three years. Home buyers who locked in mortgages then could see significant savings compared to buyers locking in a loan today.
Take a $450,000 home, for example. At a 30-year fixed mortgage rate of 5.98% — the average at the end of February — monthly principal and interest payments would be about $2,154, assuming a 20% down payment. At last week’s average rate, those payments would climb to roughly $2,278 per month.
That adds up to an extra $1,488 per year, or more than $44,640 over the life of the loan.
Still, mortgage rates are lower than they were this time last year. In mid-May of last year, the 30-year fixed mortgage averaged 6.86%. But rates have not fallen as much as some economists had initially expected after the Federal Reserve cut interest rates three times since then.
Higher borrowing rates and economic anxiety stemming from the Middle East conflict is starting to seep into the housing market, with early signs suggesting a tepid start to the spring homebuying season, a time when sales activity typically heats up.
Mortgage applications for new home purchases decreased 2.4% from a year ago, according to April data from the Mortgage Bankers Association. Compared to March 2026, applications plunged by 10%.
Fewer applications are translating into fewer home sales. Existing home sales rose just 0.2% between March and April, after dropping by 3.6% the prior month, according to the National Association of Realtors.
In addition to higher mortgage rates, national home prices have stayed near record levels. The median existing home sales price was $417,700 in April, the 34th-straight month of year-over-year price increases, according to NAR.
“There are two barriers to home ownership that are relevant right now. One is high mortgage rates; the other is uncertainty. When you buy a house, you’re cutting the biggest check you’ve ever cut in your life,” said Brad Case, chief economist at Homes.com.
“You have to have a firm foundation to make this big decision, and that’s what people are missing as a result of the moves in rates since the beginning of March, regardless of whether they’re up or down,” he added.
This story has been updated.