Three Months In: What the Iran Conflict Has Done to Mortgage Rates

The Freddie Mac 30-year fixed mortgage rate ticked up just 2 basis points this week to 6.53%, essentially flat after a volatile stretch sent the 10-year Treasury from 4.66% on May 19 down to just below 4.5% by midweek. Optimism over a ceasefire in the Iran conflict may be giving bond markets a reason to settle. Still, rates held firm this week even as Treasury yields pulled slightly back.

Three months into the conflict, mortgage rates have climbed 55 basis points from multiyear lows of 5.98%, a trend that is all about rising prices and inflation expectations. When bond markets sense more uncertainty and greater price pressures, rates go up. Unfortunately for prospective homebuyers, that’s exactly what the war in Iran has delivered. Still, there’s an important silver lining for housing demand right now: Rates remain 36 basis points below where they were at this point last year. And that may explain why this spring has proven more resilient than the tariff-marred one last year.

Despite higher rates and more economic uncertainty than expected, this spring is shaping up as the most active in four years. The market’s momentum before the conflict has not collapsed, but affordability has eroded on two fronts: higher mortgage rates and inflation quietly eating away at real wage gains. Buyers have more homes to choose from, and asking prices continue to soften, but their dollars don’t stretch as far as they did a few months back. A resolution to the conflict, therefore, would do a world of good for mortgage rates, consumers, and the housing market