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Mortgage rates reach multi-year highs as Iran war and rising oil prices drive bond yields upward

Mortgage rates have reached their highest levels since June 2025, driven primarily by renewed hostilities in the Iran war and a subsequent jump in oil prices. The 30-year fixed loan rate jumped 6 basis points on Monday to 6.87%, marking a significant increase from the end of February when rates were below 6%. These rising costs are attributed to inflation expectations, elevated bond issuance, and economic resilience. While the administration is attempting to hold rates down through bond buybacks and requiring Fannie Mae and Freddie Mac to purchase mortgage-backed securities, these efforts have had only temporary effects. The 10-year Treasury yield, which sets the tone for mortgage rates, has risen more than three-quarters of a percentage point since the war began. For prospective buyers, the increase in financing costs has added approximately $200 to $210 to the monthly principal and interest payments on a median-priced home. Additionally, current homeowners remain reluctant to give up the low mortgage rates secured in previous years. Experts suggest that if oil flows reliably through the Strait of Hormuz again and the Federal Reserve provides clearer forward guidance, rates may ease back toward 6%.

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