Mortgage Rates Retreat to 6.36% Despite Rising Inflation

Mortgage rates defied expectations by ticking down slightly this week, even as the latest inflation data revealed that surging oil prices resulting from the ongoing war in the Middle East have now bled into the costs of other goods and services.  

The average rate on 30-year fixed home loans retreated to 6.36% for the week ending May 14, down 1 basis point from 6.37% the week before, according to Freddie Mac. For perspective, rates averaged 6.81% during the same period in 2025.

“Mortgage rates ticked down this week, averaging 6.36%,” says Sam Khater, Freddie Mac’s chief economist. “While purchase demand is softening, it remains above this time last year. Recent data also shows existing-home sales modestly edging up.”

The U.S. Labor Department’s Consumer Price Index (CPI) readout released Tuesday showed that inflation increased by 3.8% in the 12 months through April to its highest level in three years, fueled by the surge in oil prices stemming from the closure of the Strait of Hormuz in Iran.  

“When prices in the future are expected to be higher, tomorrow’s dollar becomes worth less, meaning more of them are needed to finance a purchase today,” says Realtor.com® senior economist Joel Berner.

For homebuyers this spring, Berner says higher price levels spell a double whammy: they have to pay more each month in interest, and their other living expenses are growing as well, so that they cannot save up as much for a down payment. 

This is part of the reason why home sales have been stagnant so far in 2026, notching only marginal improvements over the 30-year low of the 2025 housing market. 

“The spring homebuying season should be a great opportunity for buyers, with inventory up and prices down, but home shoppers are feeling the pinch of high mortgage rates and high cost of living and they are not able to take advantage of the conditions in their favor,” says the economist. “Until the conflict in Iran is resolved, the housing market may remain another casualty of war.” 

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 loan.