U.S. Mortgage Rates Hit Near-Year High at 6.55% as Iran War Pushes Borrowing Costs Up

By Financial Analyst
July 28, 2026

The average long-term U.S. mortgage rate climbed to its highest level in nearly a year, squeezing homebuyers and limiting purchasing power amid ongoing affordability challenges.

Mortgage Rate Surge

According to Freddie Mac data released Thursday, the benchmark 30-year fixed-rate mortgage rose to 6.55% from 6.49% last week. This marks the highest level since August 28, when rates briefly hit 6.56%.

For context, one year ago the average rate was 6.75%, meaning rates have fallen overall but are now climbing again as economic pressures mount.

The average rate on a 15-year fixed mortgage also increased to 5.93% from 5.82% last week, though it remains slightly below last year's level of 5.92%.

Bond Market Drivers

Mortgage rates generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The 10-year Treasury yield was 4.57% at midday Thursday on the bond market, up from 4.54% a week ago and significantly higher than the 3.97% recorded in late February before the war with Iran began.

"The 10-year Treasury yield was 4.57% at midday Thursday on the bond market, up from 4.54% a week ago. It was just 3.97% in late February, before the war broke out," according to AP News reporting.

Iran War Impact on Housing Market

Rates have been mostly rising this year as the war with Iran has driven crude oil prices sharply higher, stoking expectations of hotter inflation. That's pushed up long-term bond yields relative to where they were before the conflict began in late February, causing mortgage rates to trend higher.

Hannah Jones, senior economist at Realtor.com, noted: "That cooler inflation reading is a step in the right direction, but until mortgage rates actually follow suit, buyers will keep feeling the pinch of stubbornly high borrowing costs even as other conditions improve."

Housing Market Slowdown

The upward trajectory in mortgage rates has weighed on home sales this year. Pending U.S. home sales fell 5.4% in June from the previous months and were down 0.3% from June last year, according to the National Association of Realtors.

Mortgage applications also signal that the upward trend in borrowing costs has given some would-be homebuyers reason to pause. Mortgage applications fell 2.7% last week from the previous week, according to the Mortgage Bankers Association. The pullback was driven mainly by a 7% drop in applications specifically to buy a home.

Fed Policy Context

The Federal Reserve doesn't set mortgage rates directly, but its decisions to raise or lower its short-term rate are watched closely by bond investors and can ultimately affect the yield on 10-year Treasurys. A report this week showing prices paid by consumers for gas, clothes and other goods cooled last month could help take pressure off the Federal Reserve, which is considering raising interest rates.

What This Means for Homebuyers

Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting homebuyers' purchasing power at a time when affordability challenges continue to sideline many aspiring homeowners. Waiting for the "perfect" rate could mean missing the right opportunity to buy, as inventory remains tight and prices stay elevated.

This article is based on reporting from AP News.