Mortgage Rates Hit 6-Month High as Iran War Ripples Housing

U.S. mortgage rates moved higher again as the housing market absorbed another week of pressure from rising Treasury yields and renewed inflation fears tied to the war in Iran. The average 30-year fixed mortgage rate rose to 6.38% for the week ending March 26, up from 6.22% a week earlier, while the 15-year fixed rate climbed to 5.75% from 5.54%.

Daily lock data showed the move had not eased by March 30. Optimal Blue’s 30-year conforming index stood at 6.422%, with the 15-year rate at 5.780%, showing that the latest rise continued into the new week after rates had dipped below 6% earlier in March. That reversal has pushed borrowing costs back to their highest range in several months.

Treasury Yields Rise as Oil and Inflation Concerns Return

The rise in mortgage rates followed a renewed move in the Treasury market. The U.S. 10-year Treasury yield reached 4.42% on March 26, according to Federal Reserve data carried by FRED, after sitting below 4% before the war began, a shift that raised borrowing costs across housing finance. Mortgage rates usually track the 10-year yield because lenders use it as a benchmark for pricing long-term loans.

Oil prices helped drive that move. We reported that Brent crude had risen nearly 59% in March as the Iran conflict widened, while the OECD said higher energy prices had lifted its 2026 U.S. inflation forecast to 4.2% and pushed the G20 inflation outlook to 4.0%. Those readings have added to market caution that inflation may stay firmer for longer than expected.

Housing Activity Shows Strain From Higher Borrowing Costs

The latest jump in rates has started to ripple through housing demand. The Mortgage Bankers Association said its Market Composite Index, which tracks mortgage application volume, fell 10.5% in the latest weekly survey. Refinance applications dropped 15% from the previous week, while the seasonally adjusted Purchase Index fell 5%.

That slowdown arrived as the spring homebuying season was getting underway. The Associated Press said the rise to 6.38% marked the highest level in more than six months. The move threatened to cool home sales just as policymakers had been trying to improve affordability. Daily rate data also showed broad upward pressure across loan types, with FHA loans at 6.185%, VA loans at 6.066%, and USDA loans at 6.020% on March 26.

Optimal Blue data for mortgage rates | Source: Fortune

Fed Outlook Remains Firm Amid Rate Expectations

The Federal Reserve left its target range for the federal funds rate unchanged at 3.50% to 3.75% at its March 17–18 meeting. That decision came before the latest leg of the oil surge, but officials have already pointed to rising inflation risk. Reuters reported that Governor Lisa Cook said the balance of risks had shifted toward inflation because of the Iran war.

For borrowers, the result is a housing market facing more expensive financing again after a brief period of relief in late February and early March. With the next Fed meeting set for April 28, markets are watching whether oil prices, Treasury yields and inflation forecasts keep moving higher. Until that pressure eases, mortgage rates may stay above the levels many buyers had hoped would return soon.