Rising Mortgage Rates Amid Middle East Tensions

Recent improvements in the cost of living were disrupted with the latest data showing a rise in mortgage rates. The national average for a 30-year fixed-rate mortgage increased to 6.55 percent for the week ending July 16. This marks a 6 basis point rise from the previous week, according to figures from Freddie Mac. It is the highest level since August 2025. For comparison, mortgage rates at this time in 2025 averaged 6.75 percent, slightly higher than current levels.

Experts were forecasting lower rates in 2026, projecting a national average below 6 percent by year’s end. Although rates dropped briefly below 6 percent in late February, they escalated again following joint military strikes by the U.S. and Israel on Iran. This military action contributes to inflationary pressure, as indicated by economists.

Factors Influencing Mortgage Rate Increases

Mortgage rates are climbing, propelled by Treasury yields remaining elevated amidst Middle East tensions. Comments from Realtor.com Senior Economist Hannah Jones emphasize uncertainty surrounding a resolution between the U.S. and Iran. The ceasefire has unraveled after Iran attacked merchant ships, leading to renewed U.S. military strikes on Iranian targets. In retaliation, Iran closed the Strait of Hormuz, prompting President Donald Trump to reinstate a blockade.

This geopolitical unrest has injected volatility into financial markets, undermining positive developments for Americans. Inflation eased in the U.S. last month, with price increases at 3.5 percent year-over-year according to the Bureau of Labor Statistics (BLS). This decline followed lower oil and gas prices, yet these costs are rebounding, contributing to inflation.

Jones noted, “June CPI data showed headline inflation cooling to 3.5 percent and core inflation easing to 2.6 percent, both below expectations. However, the Middle East conflict flared up, boosting oil prices and Treasury yields.” Mortgage rates tend to follow the 10-year Treasury yield, suggesting continued rises if oil markets remain unstable.

Future Expectations and Impact on Homebuyers

Despite revising predictions for this year, many experts maintain moderate optimism regarding future mortgage rates. “Our midyear forecast still calls for rates to ease modestly in the second half of the year,” Jones said. However, the near-term outlook is influenced by developments in Iran.

Trump targeted Iran’s infrastructure unless peace talks resumed, discussing potential actions with Fox News correspondent Trey Yingst.

The immediate effect of higher rates is felt by homebuyers facing rising costs, insurance premiums, and property taxes. Mortgage application volume fell 2.7 percent from the previous week, according to the Mortgage Bankers Association. Purchase applications dropped 7 percent week-over-week and were down 2 percent from the same period last year.

Jones remarked, “The housing market has shifted in buyers’ favor, with cooling prices, increasing inventory, and seller concessions. A cooler CPI reading is promising, but until rates align, buyers will feel the pinch of high borrowing costs.”

loanDepot Chief Economist Jeff DerGurahian shared advice for homebuyers, emphasizing budget alignment and long-term plans over waiting for optimal rates.

Rising inflation poses challenges for President Trump and Republicans as the November midterms approach. Trump’s approval rating has hovered in the 30s since April due to the prolonged Iran conflict. Newsweek contacted the White House for a comment on these developments.

According to a Washington Post-Ipsos poll, 37 percent of U.S. adults approve of Trump’s performance. Economic approval stands at 33 percent, while only 29 percent support his handling of the Iran conflict.

For further details, contact Newsweek editors Ben Kelly and Trevor Davies.