What happened
The average rate on a 30-year fixed mortgage rose to 6.46% for the week ending 3 April, according to Freddie Mac. It is the fifth consecutive weekly increase and the highest level since early September 2025.
Five weeks ago, rates had briefly dipped below 6% for the first time since late 2022. The reversal has been sharp.
Why it matters
The rate increase is driven by bond market anxiety over rising oil prices linked to the US-led military operation in Iran. Higher energy costs have fuelled inflation expectations, pushing up Treasury yields and, in turn, mortgage rates.
Monthly mortgage payments are now roughly $115 higher than they were four weeks ago. Mortgage applications have fallen nearly 40% compared to the same period last year, according to the Mortgage Bankers Association.
Impact on homebuyers
The National Association of Realtors reported that existing home sales fell 5.2% in February. First-time buyers now account for just 27% of purchases, down from 34% in 2024.
The spring homebuying season, typically the busiest period for the housing market, has stalled. Industry analysts describe the market as in a “holding pattern” as buyers wait for clarity on both rates and the broader economic outlook.
What is driving rates up
Before the Iran conflict began in late February, economists had expected rates to gradually decline through 2026 as inflation cooled. The war reversed that trajectory. When geopolitical conflict raises energy prices, inflation expectations rise and the safe-haven benefit that bonds typically provide during crises is offset.
The Federal Reserve has not changed its benchmark rate in response to the conflict, but markets are now pricing in fewer rate cuts for the remainder of 2026 than they were in February.