A flare-up in hostilities from the Iran war has sent oil prices soaring and bond yields rising, and mortgage rates are following suit.
The average interest rate on a 30-year fixed loan rose six basis points to 6.87% on Monday, according to Mortgage News Daily. That’s the highest level since June 2025, up 12 basis points since Thursday and more than 30 basis points in the past two months.
“While interest rates are technically at their highest levels in over a year, they haven’t skyrocketed with any surprising new momentum,” said Matthew Graham, chief operating officer of Mortgage News Daily. “Rather, inflation expectations, increased government debt issuance, and familiar doubts about the economy’s resilience are fueling the economy’s gradual woes. All three factors are likely to change at least to some degree in the future.”
Interest rates were expected to fall this year, but the war with Iran and the resulting rise in oil prices have upset expectations. At the end of February, the day before the war started, the 30-year fixed interest rate was 5.99%.
To put this into perspective, someone who bought a $450,000 home, which is about the national median price, with a 20% down payment on a 30-year fixed mortgage would have a monthly principal and interest payment of $2,363 today. That’s $207 more per month than at the end of February.
And that’s just the payment. As interest rates rise, fewer borrowers can qualify for mortgages because the debt-to-income ratio that lenders rely on to make safe loans changes.
This, combined with soaring housing prices, appears to be causing housing price increases to accelerate once again in some areas of the country due to a lack of supply.
According to the latest S&P Kotality Case-Shiller Home Price Index, national home prices rose 1.5% in June compared to the same month last year, up from the 1.2% rise in May.
“Current homeowners remain reluctant to part with the low mortgage rates they secured over the past few years as financing costs remain high for prospective buyers,” Rebecca Kaufman, associate director of commodities at S&P Dow Jones Indices, said in a news release.
