Mortgage Rates Climb Again as Middle East Conflict Rattles

Just weeks after dipping below a notable threshold, mortgage rates are climbing again in a potential setback for a housing market struggling to thaw.

The average rate for a 30-year fixed mortgage rose to 6.11 percent this week, according to Freddie Mac, reversing a brief drop below 6 percent in late February that had sparked optimism among buyers and sellers that activity might rebound, according to the New York Times. The 11-basis point jump from 6 percent was the largest for a week in almost a full year.

The uptick comes as geopolitical tensions ripple through financial markets. U.S. and Israeli strikes on Iran have pushed energy prices higher and revived fears of persistent inflation, sending the yield on the 10-year Treasury — a key benchmark for mortgage pricing — to about 4.25 percent, up from below 4 percent before the conflict began.

Lower rates this year began to loosen the deep freeze created when borrowing costs surged as the Federal Reserve tried to fight inflation. Even so, affordability pressures remained acute with high home prices, rising insurance costs and growing property taxes still weighing on buyers.

At 6.11 percent, mortgage rates remain well below their recent peak of 7.8 percent in October 2023, when Treasury yields approached 5 percent. But the renewed climb could quickly dampen momentum heading into the spring selling season.

“Spring feels very uncertain,” Realtor.com senior research analyst Hannah Jones told the Times. With geopolitical tensions, tariffs and broader economic volatility clouding the outlook, she said the market increasingly resembles the murky conditions of a year ago.

The market’s structural constraints remain stubborn. Millions of homeowners locked in mortgage rates below 4 or 5 percent during the pandemic, making them reluctant to sell and trade up to today’s higher borrowing costs. That lock-in effect has kept inventory tight and prices elevated.

Meanwhile, traditional buyers are increasingly being squeezed out. Investors accounted for about 30 percent of home purchases last year, according to Cotality — nearly double their share at the start of the pandemic — largely because higher-income buyers and cash investors are better positioned to absorb elevated borrowing costs. Legislation at the federal level threatens the status of investors in the market, though.

Existing-home sales rose 1.7 percent in February from the prior month, according to the National Association of Realtors, but remained down 1.4 percent year over year. Median home prices have barely budged, rising less than 1 percent nationally.

— Holden Walter-Warner