Heading into 2026, buyers were hoping for a break. Then the Iran war began in late February and the calculus changed. By Sept. 3, the typical 30-year fixed rate had climbed to 6.71%, up 73 basis points from when the conflict kicked off, according to Freddie Mac. That 6.71% mark is the highest since July 2025.
Shorter loans moved up too. The average 15-year fixed reached 6.04%, a threshold last seen in February 2025. During that window, the 10-year Treasury yield climbed roughly 80 basis points, moving a bit faster than mortgage rates did.
Lenders peg 30-year mortgage pricing to the 10-year Treasury to gauge long-run risks like inflation, interest rates, and growth; even though the Treasury offers a 30-year bond, most borrowers pay off or refinance well before then, so the 10-year mirrors mortgage behavior more closely, explained Lawrence Yun, the National Association of Realtors' chief economist.
Energy prices are pouring fuel on yields. On July 23, Brent crude touched $100 a barrel; by early September, it was still holding above $95. AAA shows the national average for gas has stayed above $4 since mid-July. Add in unease about rising federal debt and heavy borrowing by large tech companies, and investors have been more hesitant to buy US government debt, pushing yields higher.
A deescalation in the Middle East could quickly pull rates down. We saw a brief dip in early July, when the average 30-year rate eased as it appeared Iran and the US had come to a peace accord. "If oil prices were to retreat back down, if there's some resolution in the Persian Gulf situation, maybe we can touch the 6% mortgage rate quite quickly," Yun said.
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Signals from the Fed matter too. A clear focus on fighting inflation can tug mortgage rates lower, as can softer economic data. Hiring has picked up in 2026 overall, but weak June and July reports raised concerns, and then August job growth beat forecasts while unemployment held steady. If growth cools or the job market weakens, inflation would likely ease.
High rates have tapped the brakes on housing. Existing-home sales declined in three of the last six months, according to the National Association of Realtors. Realtor.com's latest trends report shows the share of listings in pending status fell 0.2% year over year in August - the first time it has turned negative since November 2025.
There is a silver lining for shoppers. Sellers outnumber buyers nationwide, and roughly one in five active listings has reduced its asking price. The S&P Cotality Case-Shiller Home Index reported in August that June home prices rose more slowly than inflation. "Housing affordability is improving, believe it or not," Yun said.
Economists warn that without progress on the Iran conflict and with inflation worries simmering, mortgage rates may stay elevated for a while or even climb. According to Mike Fratantoni, the Mortgage Bankers Association's chief economist, "It would not be surprising to me if we saw a 7% rate over this second half of the year." That kind of move filters straight into monthly payments, seller leverage and how quickly homes change hands.
If you are keeping tabs, watch the 10-year Treasury and oil. A slide in crude or a breakthrough on the geopolitical front could pull mortgage rates closer to 6% in a hurry. On the flip side, renewed inflation concerns, higher energy costs, worries about government debt and heavy corporate borrowing have been pushing yields up, which tends to keep mortgage rates firm.
