Hope for sub-6% mortgages evaporates as rates jump again
Three weeks into the war in Iran, mortgage rates have climbed above 6.5% — the highest level in over six months — after dipping briefly below 6% in February.
The steady rise of mortgage rates that began after the war in Iran started three weeks ago continued on Friday, with the 30-year fixed-rate jumping over 6.5% for the first time in more than six months.
Mortgage News Daily (MND) pegged the 30-year rate at 6.53% the morning of March 20, up from 6.36% at the start of the week. Freddie Mac, which uses a different set of metrics to gauge rates, reported the weekly average 30-year rate as 6.22% as of March 19.
Discussions among central banks about potential short-term interest rate hikes as energy prices climb may be a factor, noted Matthew Graham, chief operating officer at MND. J.P. Morgan, Morgan Stanley and Barclays have revised their forecasts in anticipation of multiple European Central Bank interest rate increases this year, according to CNBC.
Rate cut talk shifts to rate hike speculation: Before the war in Iran began, economists hadn't been expecting an increase in short-term interest rates in the U.S. anytime soon. But that possibility now seems to be on the table.
As of March 20, rate traders put the chances of a rate hike by October at 40%, according to The Wall Street Journal — up from only 6% one day earlier.
Earlier this week, the Federal Reserve decided to hold rates steady, sticking to the wait-and-see approach it mapped out at the end of 2025. Fed Chair Jerome Powell acknowledged that there had been a conversation at the March 17-18 meeting about the possibility of raising rates but said the central bank isn't currently planning for a hike.
How higher rates will impact housing's busy season: The quick and steady rise of mortgage rates could stall what was expected to be a busier spring homebuying season than what the industry experienced in 2025. Prior to the start of the war, 30-year rates had for months fallen steadily before dipping briefly below 6% at the end of February.
Daryl Fairweather, chief economist at Redfin, noted in a March 20 YouTube update that a borrower who puts 20% down on a $600,000 home would have a $168 higher monthly payment now than the day before the war began.
"This kind of volatility in terms of what could potentially happen with this war is causing volatility in the markets — and it's making it more expensive to buy a home," Fairweather said.