Mortgage Rates Hit 11-Month High Amid Iran Tensions

Average rates for 30-year fixed mortgages climbed to 6.55% for the week ending July 16, marking the highest level in nearly a year, according to Freddie Mac. This increase of 6 basis points from the previous week's 6.49% surpasses the average rate of 6.75% seen during the same period in 2025. The surge in mortgage rates is directly linked to escalating geopolitical tensions in the Middle East, specifically the ongoing conflict between the U.S. and Iran. The renewed hostilities have put upward pressure on energy prices and bond yields, consequently driving up borrowing costs for homebuyers.

Earlier in the week, a positive inflation report showing headline CPI cooling to 3.5% and core inflation at 2.6% had initially raised hopes for a potential decrease in borrowing costs. However, these expectations were quickly overshadowed by the flare-up in Middle Eastern conflict, including airstrikes exchanged between American and Iranian forces over the Strait of Hormuz. President Donald Trump issued threats to target Iran's infrastructure if peace talks were not resumed, stating, "Next week it gets really bad for them because next week comes the power plants... We're gonna knock out all their power plants. We're going to knock out all their bridges unless they get to the table and negotiate." Tehran responded with threats of regional airstrikes.

Despite the upward pressure on rates, Freddie Mac's chief economist, Sam Khater, noted that purchase application demand has weakened, but housing affordability is improving and inventory is rising, creating a "modestly improving" backdrop for prospective buyers. Realtor.com® senior economist Hannah Jones indicated that their midyear forecast still anticipates mortgage rates to [content cut off]. The interplay between geopolitical instability, energy market reactions, and central bank policy continues to be a critical factor influencing the housing market.