Impact of War on Iran: US Mortgage Rates Spike to 6.55 Percent

Geopolitical tensions are taking a direct toll on the US housing market, with the average 30-year fixed mortgage rate climbing to 6.55% this week. The surge, the highest in almost a year, was triggered by renewed conflict in the Middle East that roiled financial markets and pushed up bond yields. The increase has stifled the spring homebuying season, with pending home sales dropping 5.4% month-over-month in June, according to the National Association of Realtors (NAR). NAR Chief Economist Lawrence Yun noted that the combination of the highest mortgage rates in nearly a year and record median home prices is creating a particularly difficult environment for first-time buyers. Mortgage applications also fell 7% week-over-week, as reported by the Mortgage Bankers Association. The spike in borrowing costs follows a brief period of optimism when rates had dipped below 6% earlier in the year. However, the renewed US-Iran conflict has driven up bond yields and oil prices, with the average price of petrol rising 15 cents in a week to $3.94 per gallon. Zillow Senior Economist Kara Ng commented that while cooling inflation data reduces the likelihood of near-term Federal Reserve rate hikes, rising energy costs continue to pressure borrowing costs. In a bid to address housing affordability, a bipartisan bill aimed at increasing housing supply and limiting private equity purchases of single-family homes became law last week, though it does not regulate mortgage rates. President Donald Trump criticised the legislation, arguing that lowering interest rates was more critical. The economic strain is also reflected politically, with Trump’s approval rating dropping to 37% as the Iran conflict and economic concerns weigh on the Republican Party.