Mortgage Rates Reach New Highs
Recent improvements in the cost of living took a turn on Thursday when mortgage rates hit the highest level in nearly a year. The national average for a 30-year fixed-rate mortgage reached 6.55 percent for the week ending July 16. This marks an increase from 6.49 percent the previous week, according to Freddie Mac. This rate is the highest since August 2025 and represents this year’s peak. In 2025, during the same period, mortgage rates averaged 6.75 percent.
Experts had anticipated lower rates by the end of last year, predicting 2026 would see rates below 6 percent. In February, rates briefly dropped below this mark but rose again after the U.S. and Israel initiated strikes on Iran. The conflict affected the Strait of Hormuz, contributing to inflationary pressures.
Reasons for Rising Mortgage Rates
Mortgage rates are climbing as uncertainty over a Middle East resolution keeps Treasury yields high. Realtor.com Senior Economist Hannah Jones noted this despite positive inflation reports. The ceasefire between the U.S. and Iran collapsed recently following Iran’s attack on merchant ships. The U.S. retaliated, leading to Tehran closing the Strait of Hormuz and President Donald Trump’s reinstatement of a blockade.
As tensions rise, financial markets face renewed volatility. Inflation in the U.S. decreased last month, with the Bureau of Labor Statistics reporting a 3.5 percent increase in prices over the year to June, down from 4.2 percent the previous month. Lower oil and gas prices contributed to this drop, but similar to mortgages, these prices are rising again.
“June CPI data showed headline inflation cooling to 3.5 percent and core inflation easing to 2.6 percent, both below expectations. This is a positive sign for rate-watchers. However, renewed conflict in the Middle East this week is driving oil prices and Treasury yields higher.” – Hannah Jones
Mortgage rates often track the 10-year Treasury yield, which may remain high if oil markets remain unstable.
Future Outlook for Americans
Many experts are cautiously optimistic about mortgage rates in the coming months, although predictions for this year have been revised. “Our midyear forecast still expects mortgage rates to ease modestly over the second half,” Jones stated. This is reliant on developments in the Iran situation. President Trump expressed a willingness to target Iran’s infrastructure unless peace talks resume.
Higher mortgage rates will immediately impact homebuyers already dealing with rising prices, home insurance, and property taxes. Mortgage application volumes dropped 2.7 percent last week compared to the previous week, according to the Mortgage Bankers Association’s index. Home purchase applications fell 7 percent week-on-week and were down 2 percent from the prior year.
“The housing market has otherwise continued shifting in buyers’ favor this year, with prices cooling, inventory building, and sellers offering more concessions,” Jones said. “Despite a cooler CPI reading, until mortgage rates lower, buyers will continue to face high borrowing costs.”
Jeff DerGurahian of loanDepot emphasized, “For homebuyers, focus less on waiting for the perfect rate and more on finding a home that fits your budget and long-term plans.”
Should inflation rise further, it could create more issues for the Trump administration and Republicans ahead of the November midterms. Trump’s approval rating has declined, with a Washington Post-Ipsos poll showing only 37 percent approval of his job performance, 33 percent approval of economic policies, and 29 percent approval of his handling of the Iran conflict.
Newsweek reached out to the White House for comments on Friday morning.