Mortgage rates rise as Iran war fans inflation fears and lifts Treasury yields

Mortgage rates in the United States have surged to their highest level in three months, driven by escalating tensions in the Iran war that have sparked inflation fears and put pressure on the housing market. According to Freddie Mac, the 30-year fixed mortgage rate climbed to 6.22% in the week ending March 19, up from 6.11% the previous week.

While current borrowing costs remain below the 6.67% rate seen a year ago, the recent uptick is concerning for prospective homebuyers as the spring buying season gets underway. In late February, mortgage rates dipped below 6% for the first time since September 2022, offering some relief to buyers.

Anthony Smith, a senior economist at Realtor.com, expressed concerns about the impact of heightened uncertainty on the real estate market. He noted that the uncertainty could lead to a slowdown in both buyer and seller activity, echoing the cautious market conditions seen in the past year.

Recent data from the Mortgage Bankers Association revealed an almost 11% drop in mortgage applications last week compared to the previous week. Additionally, sales of new single-family homes declined nearly 18% in January from the previous month and are down 11.3% from January 2025, according to the Census Bureau.

The surge in mortgage rates can be attributed to the ongoing conflict in the Middle East, which has disrupted global energy supplies and driven up oil prices. The resulting uncertainty in financial markets has led to an increase in long-term bond yields, including the 10-year Treasury yield, which influences mortgage rates.

Realtor.com’s Anthony Smith highlighted the role of rising energy prices and trade uncertainty in elevating inflation expectations, consequently pushing up longer-term interest rates and mortgage rates. While the Federal Reserve’s interest rate decisions indirectly impact mortgage rates, the central bank recently opted to maintain rates as it monitors the effects of the Iran war, with a possibility of a rate cut later in the year.

Despite speculations about a potential rate cut by the Federal Reserve, some analysts remain skeptical. Gregory Daco, chief economist at EY-Parthenon, suggested that the Fed may not implement any rate cuts this year, undermining expectations of a potential rate reduction.

In conclusion, the current surge in mortgage rates reflects the broader economic uncertainties stemming from the Iran war and its implications on inflation and interest rates. Prospective homebuyers and sellers are advised to closely monitor market conditions and adapt their strategies accordingly in the evolving real estate landscape.

This article was edited by Alain Sherter, with contributions from The Associated Press.