Mortgage rates hit highest level since Iran war began

US mortgages just got more expensive: the average 30-year fixed rate climbed to 6.55% this week—the highest level since the war with Iran began rattling markets. Renewed Middle East strikes pushed bond yields higher, cooling spring buying hopes and leaving home shoppers facing tougher borrowing costs.

Key Takeaways

• The average 30-year fixed mortgage rate rose to 6.55%, its highest level in nearly a year.
• Renewed strikes tied to the Iran conflict rattled markets and lifted yields that price home loans.
• Pending home sales fell 5.4% month over month in June, according to the National Association of Realtors.
• Mortgage applications dropped 7% last week and were 2% lower than a year earlier.
• Zillow still expects rates to drift lower to about 6.4% by the end of 2026.

Why did mortgages jump this week?

Geopolitical tension is feeding directly into America’s housing costs. As WXOW reported via CNN, the average 30-year fixed rate hit 6.55% after renewed strikes in Iran rattled financial markets.

That reading is also the highest since August 2025, matching Bloomberg’s market snapshot. Mortgage pricing tends to follow the 10-year Treasury yield, which turned volatile late last week and early this week as U.S.-Iran tensions flared again after a brief ceasefire.

In February, the average rate briefly fell below 6% for the first time in three and a half years. Fighting that erupted in the Middle East days later reversed that path as investors worried the conflict would keep oil prices and inflation elevated.

Are higher mortgages already slowing home sales?

Yes—there are clear signs elevated borrowing costs are holding buyers back. Pending home sales in June fell 5.4% month over month and 0.3% from a year earlier, according to a National Association of Realtors report released Thursday.

“The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” NAR chief economist Lawrence Yun said.

Mortgage applications also fell 7% last week and were 2% lower than last year, per Mortgage Bankers Association data. Separately, Norada Real Estate Investments noted that on July 18 the 30-year refinance rate rose sharply by 36 basis points—another signal that borrowing costs remain under pressure.

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Will mortgage rates fall again in 2026?

The outlook is mixed. A temporary pause in fighting last month helped energy prices drop and inflation cool. Annual inflation measured 3.5% in June, down from 4.2% in May, the Bureau of Labor Statistics said Tuesday, with falling energy prices accounting for most of the decline.

Renewed fighting over the past two weeks sent oil prices higher again. After a brief respite, the average price for gas surged 15 cents in a week to $3.94 a gallon.

“Mortgage rates are caught between cooler inflation data and renewed energy risks,” said Kara Ng, a Zillow senior economist. Soft June inflation reduced the chance of a near-term Federal Reserve rate increase, she said, but higher oil prices are still pressuring the inflation outlook and borrowing costs.

Despite the disruptions, Zillow still expects mortgages to drift lower—though only modestly—to 6.4% by the end of 2026, still above where rates finished last year. Congress also passed housing affordability measures aimed at supply and private-equity home purchases, but the law does not set mortgage rates, which remain driven by the bond market.