Why Mortgage Rates Just Hit a 9-Month High—and What It Means for Buyers and Sellers

As summer unofficially begins, mortgage rates have climbed to their highest level in nine months, propelled higher by soaring energy costs stemming from the ongoing conflict in the Middle East.

Freddie Mac reported last Thursday that the average 30-year fixed home loan rate reached 6.51%, a benchmark not seen since late August 2025—a period dominated by economic uncertainty during the Trump administration's trade wars. 

So, how did we get here, and what's next for the housing market as it enters the traditionally bustling late spring and early summer buying season?

A look at Freddie Mac data provides a major clue. Rates had been on a relatively steady downward trajectory since last June, even dipping below 6% in late February and reaching a three-year low. Then, the dynamic abruptly shifted.

Days after Trump administration officials celebrated lower mortgage rates, U.S. forces launched Operation Epic Fury against Iran, leading to a partial blockade of the Strait of Hormuz that has severely disrupted the global oil supply.

How the war affects mortgage rates

The Iran war, now approaching its three-month mark, spiked oil prices and upended supply chains, driving the overall inflation rate to a three-year high.

However, Realtor.com® senior economist Jake Krimmel says that what's even more important is that the war is raising expectations for prices in the future.

"When bond investors expect higher prices down the road, they demand higher returns," says Krimmel. In other words, investors who buy debt demand higher interest rates when inflation is on the rise, to compensate for the weaker spending power of the dollar over the life of the loan.

Because mortgage rates closely track the 10-year Treasury yield, home loans inevitably follow when Treasury yields rise, which is what played out in May.

"These recent events show a really clear causal chain for mortgage rates: War drives energy prices, energy prices drive inflation fears, inflation fears drive up Treasury yields, and Treasury yields drive up mortgage rates," explains Krimmel.

While an uneasy ceasefire is currently in place as Washington and Tehran seek to pave the way toward an eventual peace deal, the situation remains highly volatile. Recent U.S. military strikes targeting Iranian missile launch sites and boats have further complicated diplomatic efforts.

But according to a recent note from David Oxley, chief climate and commodities economist at independent research firm Capital Economics, the reality is that even with a peace agreement, oil prices are unlikely to trend lower until mid-2027, depending on how long it takes to demine the Strait of Hormuz and reposition oil tankers.

"The longer the disruption to energy flows through the Strait of Hormuz continues, the more complex any eventual pick-up in energy flows will be," writes Oxley.

The situation in energy markets could get "a lot" worse before it gets better due to the end of the war so far proving elusive, he warns.

Affordability double whammy

For the U.S. housing market, the war-driven oil shock and resulting surge in inflation have reversed months of progress, pushing mortgage rates up 53 basis points in less than three months.

"That's very disappointing relative to where things looked headed before the war began," notes Krimmel. "But the context and perspective really matter here."

It's important to remember that rates are still 35 basis points below where they were a year ago, and from a pure affordability standpoint, this spring is still shaping up to be better than in the past few years.

According to the economist, the problem is the double blow to affordability stemming from the war: Not only are financing costs higher than buyers expected, but inflation is also eating into recent wage gains.

In April, consumer price index inflation rose 3.8% since last year, while wages grew 3.6%, meaning the war has essentially nullified real earnings growth for the typical household.

On the seller side, that diminished demand means fewer buyers competing for properties and softer prices than sellers were hoping for.

Despite these challenges, the underlying market has still shown signs of life this spring, as new listings and contract signings are both up noticeably. Yet, Krimmel says the question that will remain forever unanswered is how much more homebuying activity there would have been had the war never started.

The road ahead

If the conflict drags on much longer, the economist predicts that the double whammy of rising rates and rising inflation will only intensify.

"The housing market has been resilient so far. That's genuinely encouraging, to be sure. But there's no guarantee buyers keep rolling with the punches indefinitely," he says. "It's not just the higher financing costs and eroded purchasing power; it is also the uncertainty about how much longer this lasts and how much worse it could get."

If inflation expectations keep climbing, the Federal Reserve, headed by new Chair Kevin Warsh, will become more likely to hike the Fed's benchmark rate, a move that could keep mortgage rates elevated for longer.

For now, the CME FedWatch tool shows that there is a 99.2% chance that policymakers will keep rates steady at their next Federal Open Market Committee meeting in June.

At the consumer level, open-ended uncertainty means buyers and sellers will remain on the sidelines, mirroring last year's tariff-fueled dynamic that derailed the spring housing market before it had a chance to gain real traction.

"We're already outpacing last year's spring market, which is good news, but there's no guarantee that continues if the war, inflation, and uncertainty drag on," says Krimmel.

In the best-case scenario, a swift resolution to the conflict will stabilize oil prices, cool inflation expectations, and restore sufficient consumer confidence to buoy the sagging housing market.

"The road back to normalcy will be bumpy regardless of when the war ends," the economist concludes. "The sooner that journey starts, the better the second half of 2026 looks for buyers and sellers alike."