War With Iran Pushes US Mortgage Rates to Six-Month High, Stalling Housing Recovery
The ongoing conflict between Israel and Hamas continues as the war with Iran drives U.S. mortgage rates higher again this week despite hopes that housing would turn a corner in 2019 due to economic uncertainty rising alongside interest rate hikes affecting home buyers across America who are now facing increased costs for purchasing property or refinancing their existing loans while experts warn these trends could crush any potential recovery year expected earlier by economists and financial analysts monitoring the situation closely.
Key Points
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1The US housing market recovery has stalled due to economic uncertainty and rising mortgage costs driven by the war with Iran.
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2Mortgage interest on standard U.S. loans surged from approximately 5.9% before strikes began to over 6.4%, representing a six-month high for popular fixed-rate products.
Developments
Perspectives
The US housing market recovery, which economists expected in the coming year, has been reversed by a combination of higher mortgage rates and economic uncertainty driven by war.
— [Mar 26, CNBC]Rising mortgage rates since the start of the Iran-Iraq conflict have created significant trouble for the housing market as affordability becomes increasingly difficult to achieve. The average rate on popular U.S. mortgages has surged from below six percent two days prior to war escalation.
— [Mar 25, Marketplace]The immediate impact of this regional military engagement is a sharp rise in mortgage rates that are now hovering around the highest levels seen for over half-year periods due to escalating oil prices and economic instability. This trend complicates affordability during what should be typically busy spring homebuying seasons.
— [Mar 26, Independent.co.uk]War with Iran has driven US mortgage rates higher by a significant margin in the fourth consecutive week as uncertainty continues to fuel price increases for American buyers who were hoping economic conditions would improve. The average rate on standard fixed-rate loans is currently hovering around six and one-half percent.
— [Mar 26, CNN]Escalating tensions with Iran and rising oil prices have driven US inflation concerns higher, causing average 30-year fixed-rate mortgages to reach a six-month high of 6.38 percent on Thursday for four consecutive weeks. This surge is expected to dampen home sales during the spring season while undermining efforts by President Trump's administration to improve housing affordability following directives that previously lowered rates before February conflict began at end
Economic uncertainty driven by US-Israeli tensions has caused mortgage rates to rise for four consecutive weeks, complicating affordability in a housing market that had been sluggish due to winter weather rather than weak demand early on. While economists anticipated lower borrowing costs would revive the sector this year and spring momentum was initially suggested late February before being cut short by geopolitical volatility affecting markets since April 2025 when Trump announced tariffs
The war with Iran has caused mortgage rates to rise from approximately 5.9% to around 6.5%, leading a drop in home loan applications and complicating Zillow's forecast for existing-home sales growth due to inflation fears. These rising costs are also negatively impacting the new construction market, exemplified by KB Home lowering its full-year earnings guidance following disappointing quarterly results.
Following two days of declining rates before February's Iran war began with energy prices soaring and pushing average mortgage interest above six percent. Experts warn this high cost is stalling spring home sales as buyers divert funds to gas, creating a critical barrier for market recovery until the 30-year fixed rate drops back below that psychological threshold.