After a brief dip into the fives, mortgage rates ticked back up this week and will likely continue to rise if the conflict with Iran escalates into a prolonged war, economists cautioned this week.
“The launch of the conflict in Iran over the weekend and its subsequent escalation has stoked fears of wartime inflation that are driving the 10-year Treasury yield higher, and we expect mortgage rates to follow suit,” said Realtor.com® Economist Joel Berner. “For rates to continue their descent in 2026, we will need clear signals in the months to come that this conflict is not driving up prices for consumers at home. Given the major jump in oil prices this week and the increased shipping costs that go with that, this positive news on inflation may be hard to come by.”
The average mortgage rate ticked up to 6% this week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday, after last week dipping to 5.98%, the lowest level average in over 3.5 years.
Bright MLS Chief Economist Lisa Sturtevant said investors have grown concerned about the potential inflationary impacts of the conflict with Iran, pointing to new uncertainty being introduced into what had been looking like the start of a strong spring home-buying season.
“If the conflict is limited in duration and scope, higher energy prices, bond yields and mortgage rates could all be temporary, and mortgage rates could settle back down to around 6%,” Sturtevant said. “Alternatively, if this is a prolonged conflict, there could be major energy disruptions, leading to higher inflation and higher mortgage rates, which could create a structural shift in the housing market with fewer transactions.”
While lower rates have caused a flurry of refinance activity in recent weeks, economists said steady lower rates are critical for spurring buyer activity in a period when sales activity is slow and also for mitigating the lock-in effect and adding supply to the market.
“Market conditions have been shaping up nicely for buyers: prices are down, inventory is up, mortgage rates are well below last year’s levels. So far this year, though, these conditions have not translated into boosted sales activity, and consumer confidence is to blame,” Berner said. “Economic uncertainty is not a position from which many people are interested in making the largest purchase of their life, and the conflict in Iran just added to the anxiety pile that already included tariffs, last year’s soft labor market, stock market volatility and AI job loss concerns.”
Economists stopped short of sounding the loudest alarms for now, noting concerns while pointing to the market’s current positives of significant annual mortgage rate declines, ongoing refinance opportunity and a possible temporary conflict in the Middle East.
“Mortgage rates held steady at 6% this week, hovering near their lowest level since 2022,” said Sam Khater, Freddie Mac’s chief economist. “In fact, rates are down nearly a full percentage point from this time in 2024, spurring activity from buyers, sellers and owners. As a result, refinance activity is up, and purchase applications are ahead of last year’s pace.”
“Mortgage rates had been on a steady decline since last summer when they registered in the high-6% range, and this week’s readout will be much lower than a year ago at this time when they came in at 6.63%, but it is still a bit disappointing to have only spent one week in the 5% territory,” said Berner.
“At least for now, the data suggests a more limited, temporary impact on mortgage rates,” Sturtevant noted. “Further upward pressure on mortgage rates is unlikely at the moment, and rates are still at the lowest level since September 2022. However, affordability is still a challenge and consumers are feeling anxious. Many buyers are going to be cautious as we enter the spring housing market.”
Click here to view the full Freddie Mac report.
