Iran war pushes mortgage rates near yearly high

Mortgage rates zoomed up 11 basis points this week as the Iran war wreaked havoc on oil prices, putting both the bond and equity markets in turmoil.

The 30-year fixed-rate mortgage averaged 6.11% on March 12, the Freddie Mac Primary Mortgage Market Survey reported. This compared with last week's 6% and a year ago at this time, the rate averaged 6.65%.

The increase brings the 30-year back to the same level as the start of February, tying the second highest point this year so far.

Meanwhile, the 15-year FRM rose 5.5%, a gain of 7 basis points versus last week when it averaged 5.43%. For the same week in 2025, the 15-year FRM was at 5.8%.

"Despite the modest uptick, buyers are responding to rates in this range, with existing-home sales increasing 1.7% in February," Sam Khater, chief economist at Freddie Mac, in a press release. "Purchase applications also increased this week, a welcome sign as buyers enter spring homebuying season with rates down more than half a percentage point compared to the same time last year."

Although this increase could be discouraging to consumers, the current rate environment still translates into meaningful savings for homeowners who took out a loan during the higher-rate conditions, said Kyle Bass, production business manager at mortgage originator Refi.com.

"Recent Mortgage Bankers Association data shows refinance applications continuing to climb, with refinance activity now making up nearly two-thirds of all mortgage applications," said Bass. "We're seeing homeowners recognize that they don't necessarily need a dramatic rate drop for refinancing to make sense."

Lender Price data on the National Mortgage News website as of 11 a.m. Thursday morning had the 30-year fixed at 6.43%, up 6 basis points from a week ago, when it was 6.37%. This is still below where it was for the same week in 2025, at 6.82%.

How gains in the 10-year Treasury affected mortgage rates

The 10-year Treasury yield, a benchmark for pricing mortgages, was at 4.23% at this point on Thursday morning. It had closed Wednesday at 4.21%; on March 5 it ended the day's trading at 4.15%.  

It was just two weeks ago the market was looking at Treasury yields under 4% and the 30-year FRM under 6%. But since the Iran conflict started, concerns over oil prices has impacted the bond market. Futures were up over $100 per barrel earlier this week.

The Mortgage Bankers Association Weekly Application Survey released on Wednesday found conforming mortgage rates increased 10 basis points for the period ended March 6, to 6.19%. Still application activity overall increased 3.2% seasonally adjusted, driven by a 7.8 gain in purchase activity, with little movement in refinance volume.

"Borrowers continue to take advantage of mortgage rates around 6%," Bob Broeksmit, MBA president and chief executive, said in a Thursday morning statement. "Despite ongoing geopolitical tensions and broader economic uncertainty, overall demand remains strong."

The good news about mortgage rates this week

Even though rates were up, it wasn't a big move and this was good news, said Kate Wood, NerdWallet's home and mortgage expert who was also commenting on the MBA report. Rates are about 60 basis points to 75 basis points below where they were a year ago.

"Geopolitical uncertainty coupled with higher food and fuel prices hitting consumers' wallets may be dampening some potential home buyers' enthusiasm, but this remains an excellent rate climate for refinancers," said Wood. "Folks who bought relatively recently — think during market highs in 2023 or 2024 — are finally getting the rate relief they've been waiting for."

How likely is the Fed to cut rates at its next meeting?

The release of the Consumer Price Index data earlier this week solidified the likelihood the Federal Open Market Committee will leave short-term rates unchanged at its next meeting.

At the earliest, the next reduction could come in July, said Nigel Green, CEO of the deVere Group, a financial consultant. Some had expected action in the spring.

"The window for the first rate cut has materially shifted," said Green. "Markets had been looking for earlier action, but inflation dynamics and the spike in oil prices mean policymakers will almost certainly hold next week and remain cautious in the months ahead."

Furthermore, even after the Fed makes its next cut, the easing cycle will be gradual, Green continued, as the market watches inflation data alongside developments in the energy sector and geopolitics.

The impact of the CPI report on housing is that mortgage rates will remain choppy in the near term, said Sam Williamson, senior economist at First American. Continued easing of inflation should allow rates to drift moderately lower over time.

"Even so, easing inflation, slowing shelter costs, and improved house‑buying power are helping to improve affordability," Williamson said. "This shifts attention back to fundamentals — especially new listings activity — which will be critical in determining whether pent‑up demand translates into sustained sales this spring."