10
Loading video...
By Giulia Carbonaro
Senior Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Mortgage rates climbed to their highest level since July 2025 this week following the resumption of hostilities between the United States and Iran, compounding housing affordability pressures and marking a sluggish end to the summer market.
According to Freddie Mac, the average for a benchmark 30-year fixed home loan rose to 6.71 percent for the week ending September 3. The increase reverses projections from late 2025, when analysts anticipated that rates would moderate to 6 percent by the end of 2026.
Why Mortgage Rates Are Rising Now
The upward pressure deals a blow to President Donald Trump, who repeatedly criticized former Federal Reserve chair Jerome Powell about key borrowing costs and pledged to restore housing affordability.
Read More on News
Rates had briefly dipped below the 6 percent threshold in late February—with the 30-year fixed mortgage rate averaging 5.98 percent for the week ending February 25—for the first time since September 2022. However, the onset of the conflict with Iran on February 28 upended global markets and reversed the downward trend.
“The Middle East conflict has put upward pressure on oil prices, fueling inflation and pushing it further from the Fed’s 2 percent target,” Realtor.com senior economist Jiayi Xu said in a statement shared with Newsweek. “When the conflict appeared to be nearing resolution, bond yields declined and mortgage rates followed suit,” she added. “But the latest escalation in Middle East tensions has driven oil prices higher, reviving inflation concerns and pushing yields and mortgage rates back up.”
Related Story
Trump’s Plan To Lower Mortgage Rates Could Run Into Trouble
What Higher Mortgage Rates Mean for Homeowners
For current homeowners with fixed-rate mortgages, the immediate effect is minimal because their terms are locked in. This dynamic has largely immobilized the housing market, as owners with low legacy rates opt to stay put rather than forfeit favorable terms.
“Americans are locked in place,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors (NAR), told Newsweek. “Many homeowners are locked in by the golden handcuffs of low-interest rate mortgages and do not have a motivating factor that would cause them to move, even if their home is no longer the ideal fit for them.”
This "rate lock" phenomenon has constrained inventory and prolonged a nationwide housing shortage that intensified after borrowing costs doubled in 2022. By contrast, owners holding adjustable-rate mortgages (ARMs)—which feature rates that adjust periodically following an initial fixed term—face heightened exposure as their terms reset against higher benchmark rates.
First-time and prospective homebuyers bear the heaviest burden from elevated borrowing costs.
“Today’s rates put additional strain on affordability, particularly for first-time homebuyers,” loanDepot Chief Investment Officer and head economist Jeff DerGurahian said in a statement shared with Newsweek. “But the long-term case for homeownership remains intact. The country is still significantly underbuilt, and that shortage of available homes should continue to support housing demand and help preserve home values over time.”
He continued: “That does not mean buyers should expect another period of rapid, pandemic-era appreciation. But if you find a home that fits your needs and budget, you’re investing in an asset that can preserve value and build equity over time. And at the end of the day, it’s also the place you call home.”
Related Story
Three Things To Watch in the US Housing Market This September
Amid rising rates, listing prices have softened, offering some leverage to active buyers.
Realtor.com data shows the national median list price fell to $424,500 in August, down 1 percent from July and 1.3 percent year-over-year. While August marked the 10th consecutive month of annual price declines, the rate of decrease slowed compared to July’s 2.4 percent drop. Meanwhile, 20.4 percent of active listings featured price reductions, up 0.4 percentage points from the previous month.
“Pricing and delisting trends do suggest a better match between what buyers and sellers want this year, even though sales themselves haven’t moved much,” Realtor.com senior economist Jake Krimmel said in a statement shared with Newsweek. “If July’s market was coasting, August decelerated, and I’d expect that trend to continue into fall, partly on normal seasonal patterns and partly because mortgage rates are moving in the wrong direction rather than buoying the market the way they did last fall.”
...
Will Rates Continue Climbing or Will They Finally Fall?
Xu said that Realtor.com analysts do not expect any real mortgage rate relief this fall since the Federal Reserve is expected to bring its rate up later this year.
After new chairman Kevin Warsh said the policy rate remains the central bank's primary tool to bring inflation back down during a speech in Jackson Hole in Wyoming last week, nearly 57 percent of traders were betting on a rate hike at the bank’s September meeting.
“If Warsh’s Jackson Hole speech didn’t do enough to put upward pressure on rates by bringing the possibility of a hike back into play, renewed conflict between the U.S. and Iran has put the war and its inflationary impact back at the forefront of the rate conversation,” DerGurahian said. “Fresh strikes and attacks pushed oil prices sharply higher, reigniting concerns that elevated energy costs could feed into inflation. If the conflict continues to escalate or further disrupts the flow of oil, Treasury yields and mortgage rates could face additional upward pressure.”
But if inflation is not “tamed, the pain will be real,” Xu said. “Higher inflation would simultaneously erode paychecks and real income growth while keeping mortgage rates elevated for longer. That’s a squeeze on housing from both sides: what people can afford, and what they’re willing to buy into."
Contact Newsweek editors for this story: Matthew Robinson and Anthony Murray.
Related Story
Trump Threatens Iran With ‘Biggest Attack of Them All’ After New US Strikes
View 0 Comments
Submit Correction
View Editorial & AI Guidelines