The average 30-year fixed mortgage bounced back to 6% for the week ending March 5, according to data from Freddie Mac. The quick reversal comes as financial markets react to the sudden outbreak of conflict between the U.S. and Iran, sending ripples through the economy.
Mortgage rates typically track the yield on the 10-year Treasury note, which has been on a rollercoaster since the U.S. and Israel launched military strikes in Iran last Saturday. Usually, in times of global chaos, investors flock to U.S. government bonds as a "safe haven," which pushes yields—and mortgage rates—down. This time, however, the script has flipped.
Wall Street is currently spooked by the threat of a massive oil price shock. If energy prices skyrocket, inflation could come roaring back, which would likely force the Federal Reserve to keep interest rates "higher for longer" to keep the economy from overheating.
Just last week, there was a sense of optimism in the air as mortgage rates dipped to 5.98%. It was the first time they had broken the 6% barrier since 2022, crossing a major psychological finish line that many hoped would finally "unstick" the sluggish American housing market. For years, the "lock-in effect" has kept homeowners from selling, as they didn't want to trade their pandemic-era 3% rates for something double that.
“Mortgage rates took a quick dip under 6% before the oil shock pulled them back up. Even so, the affordability gains we've seen over the last year haven't disappeared overnight,” said Kara Ng, senior economist at Zillow. “Homebuyers who didn't jump on a mortgage during that brief window might feel like they missed a flash sale, but compared to this time last year, they’re still getting a much better deal.”
According to Zillow’s data, the average buyer’s purchasing power is up about $30,000 compared to early 2025, when rates were still hovering in the high 6% to low 7% range.
But even with slightly better rates, the housing market isn't exactly on fire yet. The National Association of Realtors reported that home sales dropped 8.4% in January, with every region of the country seeing a dip. Because inventory is still incredibly tight, the median home price has now risen for 31 straight months, making it a tough environment for first-time buyers.
Financial analysts are warning that if the situation in the Middle East drags on, we could see a broader sell-off in the bond market. If that happens alongside rising gas prices, the downward trend in mortgage rates we've seen over the last several months could vanish entirely.
“The jump in rates was relatively small this week, but the uncertainty is the real story here,” said Sam Khater, Freddie Mac’s chief economist. “While we are seeing more people apply for mortgages than we did last year, this volatility is a clear reminder that the road to a housing recovery is going to be a bumpy one.”
