Mortgage Rates Climb as Iran Conflict Fuels Economic Uncertainty
US mortgage rates have edged upwards, reversing a recent downward trend, as the conflict in Iran sends ripples through global financial markets. The average 30-year fixed mortgage rate now stands at 6%, a modest increase from 5.98% last week, according to Freddie Mac. This shift comes after a period of optimism, where rates briefly dipped below 6% for the first time since 2022.
The Impact of Rising Oil Prices
The primary driver behind this increase is growing concern over inflation, directly linked to rising oil prices. Military actions initiated by President Donald Trump and Israel in Iran have disrupted crude oil shipments through the Strait of Hormuz, a critical waterway for global supply. Gas prices in the US have already jumped 26 cents a gallon since last week, according to GasBuddy.
A Psychological Blow to Homebuyers
While the increase is relatively small, experts suggest the psychological impact could be significant. “Two hundredths of a percentage point is not making or breaking anyone’s ability to buy a home,” says Kate Wood, a lending expert at NerdWallet, “But psychologically… this feels huge.” The brief dip below 6% had raised hopes of reviving the housing market, but this progress is now threatened.
Bond Market Reactions and Safe Haven Assets
Typically, during times of global turmoil, US government bonds are seen as a safe haven, driving yields lower as investors seek stability. However, the current situation is different. The 10-year Treasury yield has climbed since the military strikes began, reaching 4.14% on Thursday afternoon, up from 3.96% on February 27th. Investors are shifting towards even more stable assets, like money market funds, contributing to the bond sell-off.
Refinance Rates Offer a Silver Lining
Despite the increase in mortgage rates for home purchases, rates for refinancing have actually decreased. The average rate for refinancing fell to 5.43% this week, down from 5.44% the previous week. This offers some relief to homeowners looking to adjust their existing loans.
The Lock-In Effect and Housing Supply
Many homeowners who secured ultra-low mortgage rates during the pandemic are hesitant to sell their homes and grab on significantly higher rates. This “lock-in effect” is limiting housing supply and contributing to elevated prices. A rate starting with a “5” was hoped to encourage more sellers to enter the market, but the recent increase may prolong this situation.
Looking Ahead: The Duration of Conflict is Key
The long-term impact on mortgage rates will largely depend on the duration and escalation of the conflict in Iran. President Trump has suggested the conflict could last “far longer” than initially estimated. A prolonged conflict, combined with sustained inflationary pressure from rising oil prices, could disrupt the recent downward trend in mortgage rates and potentially push them even higher.
Frequently Asked Questions
Q: What is the current average 30-year fixed mortgage rate?
A: 6% as of March 5, 2026.
Q: Why are mortgage rates increasing?
A: Primarily due to rising oil prices and concerns about inflation stemming from the conflict in Iran.
Q: Are refinance rates also increasing?
A: No, refinance rates have actually decreased to 5.43% this week.
Q: What is the “lock-in effect”?
A: The reluctance of homeowners with low mortgage rates to sell their homes, limiting housing supply.
Did you know? Mortgage rates briefly fell below 6% before the recent oil shock, marking the first time they’d done so since 2022.
Pro Tip: Keep a close eye on oil prices and geopolitical developments, as these factors will likely continue to influence mortgage rate trends.
Stay informed about the latest economic developments and their impact on your financial decisions. Explore our other articles on housing market trends and mortgage rate forecasts for more insights.
