Folks, I almost spilled my coffee reading this one. It seems that the war in Iran has been going on for five months now, and it’s having a significant impact on the economy. Rising oil prices and stubborn inflation are driving mortgage rates to the highest level in a year. I mean, who doesn’t love paying more for their home loan, right? The average 30-year fixed mortgage rate climbed to 6.66% this week, the highest since July of last year, according to Freddie Mac. That’s up from 6.58% last week, marking the biggest one-week jump in mortgage rates in 10 weeks. I guess that’s what happens when you’ve got a war going on and investors are getting a little nervous.
Now, I know what you’re thinking – what about the housing market? Well, it’s not exactly thriving, that’s for sure. Just a few months ago, mortgage rates dipped below 6% for the first time in years, fueling hopes that lower borrowing costs would revive the sluggish housing market. But since the US and Israel began joint strikes on Iran in February, investors have grown increasingly concerned that higher energy prices will keep inflation elevated. And let’s be real, who wants to buy a house when they’re not sure what’s going to happen with the economy?
But, on the bright side, new inflation data showed that price increases slowed during a brief June truce in the Middle East. The Personal Consumption Expenditures price index dropped 0.1% from May, bringing the annual rate to 3.7%, according to the Commerce Department. That’s a tiny bit of good news, I suppose. Even with the reprieve, inflation is still significantly above the Federal Reserve’s target 2% inflation level. Somewhere in Atlanta, a producer thought this sounded terrifying, I’m sure.
Mortgage rates loosely track the 10-year Treasury yield, a key measure of investors’ inflation expectations. The yield recently climbed to its highest level since January 2025, reflecting expectations that interest rates will remain higher for longer. But this week, the Fed voted to keep its benchmark interest rate steady. Still, some analysts interpreted Chairman Kevin Warsh’s comments about inflation to signal there could be rate hikes in the near future. You can’t make this stuff up, folks.
The Fed doesn’t directly influence Treasury yields or mortgage rates, but Warsh also said that market moves, like the recent rise in Treasury yields, may be partially doing the Fed’s job of taming inflation by causing higher borrowing rates to ripple through the economy – including in the form of elevated mortgage rates. “Oil and inflation remain the biggest drivers, and mortgage rates will likely need energy prices to settle and inflation to remain under control before they can move meaningfully lower,” said loanDepot head economist Jeff DerGurahian. Bless their hearts, trying to make sense of all this.
There are already signs that higher mortgage rates are slowing the engine of the housing market. Mortgage applications fell 6.4% last week from the week earlier, according to data released Wednesday from the Mortgage Bankers Association. Refinance applications plunged by 10% in a week, according to the report. Still, today’s 30-year fixed rate is lower than this time last year – 6.72% in July, according to Freddie Mac. And in most of the country, wage growth has outpaced home-value growth this year. That has helped affordability, said Kara Ng, a senior economist at Zillow.
But, as Ng also pointed out, “Still, rising prices of everyday goods and services have eaten into those gains, limiting how much buyers can comfortably spend on a home.” Yeah, no kidding. It’s all a big mess, if you ask me. In conclusion, it seems like the war in Iran is having a big impact on the economy, and mortgage rates are suffering as a result. But hey, at least we can all take comfort in the fact that coffee prices haven’t gone up… yet. ☕️ And who knows, maybe the housing market will bounce back – but I’m not holding my breath.
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
