US mortgage rates have climbed in the wake of the US and Israeli war in Iran.
The conflict has pushed oil prices sharply higher, rising from roughly $70 per barrel to more than $100 per barrel. That jump follows disruption around the strategic Strait of Hormuz, a route used for about 20 percent of the world’s oil shipments, after it was blocked.
With markets unsettled and inflation concerns growing, the average interest rate for a conventional 30-year fixed mortgage has moved up from 6.11 percent to 6.22 percent, its highest level since December.
In practical terms, the rise means financing a home purchase has become more expensive for borrowers across the US.
Because the following calculations rely on nationwide averages for income and home prices, the real-world impact will differ considerably depending on where a buyer lives.
Across the country, average annual earnings are about $64,505. After typical tax deductions, that works out to around $4,480 per month in take-home pay.
Zillow currently estimates the average US home value at $360,591, though this varies widely by state. That figure is roughly 6.7 times the average annual salary.
At a 6.22% rate, a $360,591 mortgage over a 30-year term would translate to monthly payments of about $2,213.
For a single borrower paying that alone, $2,213 out of a $4,480 monthly take-home income would go to the mortgage—just over 49 percent each month.
By comparison, Zillow lists the average rent “for all bedrooms and all property types” at $2,000 a month, meaning the typical mortgage payment at current rates could exceed average rent in some cases.
There are also early signs the increase is cooling demand. The Mortgage Bankers Association reported mortgage applications fell 10 percent last week.
Mortgage Bankers Association CEO Bob Broeksmit told CNN: “Whether this upward pressure on rates – tied to Middle East tensions – will temper what should be strong spring demand remains to be seen.”
“It has been five years and we had the tariff shock, the pandemic, and now we have an energy shock of some size and duration. We don’t know what that will be,” he said. “You worry that is the kind of thing that can cause trouble for inflation expectations.”
Federal Reserve Chair Jerome Powell has also cautioned that economic pressures could be affected not only by the war in Iran, but also by Trump’s tariff agenda.
He said: “It has been five years and we had the tariff shock, the pandemic, and now we have an energy shock of some size and duration. We don’t know what that will be.
“You worry that is the kind of thing that can cause trouble for inflation expectations.”