Mortgage Rates Hit 7.49% as Iran War Drives Up Costs

The average interest rate on a 30-year fixed mortgage has climbed to 7.49%, its highest level since November 2023, according to the Mortgage Bankers Association. The latest increase continues a sharp rise in borrowing costs that is making homeownership increasingly unaffordable for American families.

The Iran War is a major contributor. U.S. and Israeli strikes against Iran, followed by disruptions to oil shipments through the Strait of Hormuz, have driven up energy prices and intensified concerns about inflation. Higher oil prices increase transportation, manufacturing, and other business costs, putting additional pressure on consumer prices.

Those inflation concerns are also affecting financial markets. Investors are demanding higher yields on long-term U.S. Treasury bonds, particularly the 10-year Treasury note, which serves as a key benchmark for mortgage interest rates. As Treasury yields rise, mortgage lenders generally raise their rates as well. Strong economic growth, federal borrowing, and expectations of additional Federal Reserve rate increases are adding to the pressure.

The result is a direct connection between events in the Middle East and the cost of purchasing a home in Iowa.

Since the U.S.-Israeli strikes began in late February, mortgage rates have increased approximately 1.4 percentage points. Higher borrowing costs are already discouraging homebuyers and homeowners considering refinancing. Mortgage applications fell another 4.2% last week, with refinancing applications dropping 8%.

For prospective homebuyers, the consequences are substantial. On a $250,000 mortgage, the difference between 6.66% and 7.49% adds approximately $137 to the monthly principal-and-interest payment, or more than $1,600 annually.

With the November elections approaching, the rising cost of housing adds another dimension to voters’ concerns about inflation and affordability. The economic consequences of the Iran War are no longer confined to gasoline pumps and grocery stores. They are increasingly reflected in the monthly cost of owning a home.