Mortgage rates saw a meaningful increase Thursday as a fragile U.S.-Iran peace deal disintegrated amid a hail of mutual airstrikes, driving up oil prices and long-term borrowing yields.
The average rate on 30-year fixed home loans rose to 6.49% for the week ending July 9, up 6 basis points from 6.43% the previous week, according to Freddie Mac. For perspective, rates averaged 6.72% during the same period in 2025.
“The 30-year fixed-rate mortgage averaged 6.49% this week,” says Sam Khater, Freddie Mac’s chief economist. “Mortgage rates have not changed much recently, but economic growth and housing affordability continue to improve for homebuyers as they shop for homes in today’s market.”
The surge in interest rates came after the U.S. and Iranian forces traded airstrikes in the Middle East this week, jeopardizing the ceasefire between the two sides and stoking fears of further inflation.
Speaking during a press conference in Turkey on Wednesday, President Donald Trump said the agreement with Iran was “over” and offered some choice words about the country’s leadership.
“I don’t want to deal with them anymore. They’re scum,” said Trump. “They’re sick people.”
Realtor.com® senior economist Joel Berner explains that the primary mechanism by which the war in Iran has contributed to inflation, and thereby higher interest rates, is through the price of oil, which has advanced this week.
The price of U.S. crude oil shot up to $76 per barrel on the heels of Trump’s remarks about the peace deal, marking the largest one-day surge since the beginning of June.
“Mortgage rates looked like they were poised for a retreat in recent weeks, but the deterioration of the situation in Iran has put them on an upward trajectory yet again,” says Berner.
Still, the Federal Reserve is unlikely to provide any downward pressure to interest rates despite a somewhat soft jobs report last week. Based on that, Berner predicts that last week’s Freddie Mac readout of 6.43% may serve as a low watermark for some time, especially if tensions in the Middle East continue their resurgence.
The Realtor.com midyear forecast calls for marginally lower mortgage rates and a modest improvement in home sales volume for the rest of 2026, both of which are put in jeopardy by the recent re-escalation of the Iranian conflict, according to the economist.
Home price growth that is slower than inflation and wage growth is expected to lead to some improvements to affordability, but higher mortgage rates are undermining this dynamic.
On a positive note, the housing market has moved in a buyer-friendly direction this year, with prices falling, inventory growing, and time on market slowing.
“Stubbornly high mortgage rates are a big part of what’s holding buyers back from making 2026 a major improvement over the past few years of home sales, and the current situation in Iran may keep them higher for longer,” says Berner.
How mortgage rates are calculated
Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.
When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to increase. Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates to fall.
The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.
Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.
How your credit score affects your mortgage
Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you’ll receive. The higher the credit score, the lower the interest rate you’ll qualify for.
The credit score you need will vary depending on the type of loan. A score of 620 is a “fair” rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.
Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates, which can reduce monthly payments.
Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders have stricter criteria when evaluating whether to approve a loan. Ultimately, they want to make sure you’re able to pay back the
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