Mortgage rates have climbed 71 basis points since late February, when conflict with Iran began. Freddie Mac reported the national average 30-year fixed rate reached 6.69% on August 6, a 2026 high, while 15-year rates hit 6.01%, a level last seen in May 2025. Mike Fratantoni, chief economist at the Mortgage Bankers Association, warned rates could touch 7% in the second half of the year if inflation concerns persist. Brent crude topped $100 a barrel in late July and retail gas prices averaged $4.08 nationwide as of early August, contributing to inflation fears that have pushed the 10-year Treasury yield up roughly 70 basis points.
Mortgage lenders base 30-year fixed rates on the 10-year Treasury yield, not directly on Federal Reserve policy rates. Bond investors demand higher returns on long-term Treasuries when inflation expectations rise, since fixed payments lose value as prices increase. Fed Chair Kevin Warsh’s reluctance to commit to rate hikes on July 29 sent the 10-year yield to its highest level since early 2025, pulling mortgage rates higher in tandem. A peace deal in the Middle East or renewed Fed commitment to controlling inflation could reverse the trend; the average 30-year rate drifted lower in early July when a peace agreement appeared possible.
Existing-home sales have fallen in three of the past six months, according to the National Association of Realtors, and mortgage applications dropped in the final two weeks of July. Lawrence Yun, chief economist at NAR, noted that one in five active listings has reduced asking prices and home prices rose slower than inflation in May. Pending home sales fell to their lowest level since early April in late July, but the median US housing payment dropped to a three-month low and sellers’ median asking prices hit a one-year low, suggesting affordability is improving despite elevated rates.
Bloomberg
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