Mortgage Rates Surge to Seven-Month High as Iran War Drives Bond Yields Higher

Mortgage rates jumped to a seven-month high Friday as war in Iran pushed bond yields higher, with the average rate for long-term mortgages reaching 6.46 percent, the highest level since September 2025.

The increase reflects rising U.S. Treasury yields, which have surged amid the conflict in Iran, threatening a spike in borrowing costs as higher gasoline prices already strain household budgets.

The 10-year Treasury yield, a key benchmark for mortgage and credit card rates, has climbed to about 4.45 percent, marking a nearly half-percentage point increase from a month earlier.

This level brings the yield close to levels seen after President Donald Trump’s “Liberation Day” tariffs in April 2025, when the 10-year Treasury peaked around 4.5 percent before easing.

Higher bond yields make borrowing more expensive for average Americans, since they influence the rates offered for mortgages, auto loans, and credit cards.

Mark Hamrick, senior economic analyst at Bankrate, told ABC News that the Middle East conflict is “hurting the opportunity for Americans to make ends meet, much less afford a potential home purchase,” calling the situation “quite upsetting.”

The surge in mortgage rates adds new stress for homebuyers, potentially adding hundreds of dollars per month to mortgage costs compared to lower-rate periods.

The Mortgage Bankers Association reported that new mortgage applications are down more than 10 percent week over week, reflecting reduced demand amid rising borrowing costs.

Earlier in 2026, mortgage rates had reached their lowest point since 2022, but economic disruptions from the war in Iran have boosted oil prices, raised inflation concerns, and contributed to the recent climb in lending rates.

The current rate of 6.46 percent is down year over year from 6.64 percent, but up from 6.38 percent the prior week and represents the highest level for at least the last six months.

The last time the average rate was higher came in September 2025, when it sat at 6.5 percent.

Homebuilders such as KB Home, Toll Brothers Inc., NVR Inc., PulteGroup Inc., and Lennar Corp. Are directly affected by shifts in mortgage rates, as affordability impacts demand for new housing.

Exchange-traded funds tied to the housing sector, including the iShares U.S. Home Construction ETF and the SPDR S&P Homebuilders ETF, often reflect investor sentiment toward homebuilding stocks amid changing rate environments.

Financial sector ETFs like the iShares U.S. Regional Banks ETF and the Invesco KBW Premium Yield Equity REIT ETF may also experience volatility as banks adjust to shifting interest rate dynamics affecting loan profitability and mortgage-backed securities.

Looking ahead, stability in the mortgage rate environment will be key to bringing buyers back into the market, according to Bob Broeksmit, CEO of the Mortgage Bankers Association.