Recent improvements in the cost of living faced a setback as new data showed a rise in mortgage rates, reaching their highest point in nearly a year. The national average for a 30-year fixed-rate mortgage rose to 6.55 percent for the week ending July 16. This is an increase of 6 basis points from the previous week’s 6.49 percent, according to Freddie Mac. This level hasn’t been seen since August 2025 and marks this year’s peak so far.
In comparison, during the same period in 2025, mortgage rates averaged 6.75 percent, slightly higher than now. However, by the end of last year, experts anticipated that 2026 would bring significantly lower rates, predicting a national average just below 6 percent. In late February, mortgage rates dipped briefly below 6 percent before rising due to joint military strikes by the U.S. and Israel on Iran. Economists link this military action and the resulting blockages in the Strait of Hormuz to inflationary pressures.
Rising Mortgage Rates and Their Impact
Realtor.com Senior Economist Hannah Jones noted, in a statement shared with Newsweek, that rising mortgage rates coincide with elevated Treasury yields, despite encouraging inflation reports. This is attributed to increased tensions in the Middle East.
The ceasefire between the U.S. and Iran has crumbled after Iran attacked merchant ships in the Strait of Hormuz. The U.S. responded by conducting strikes on Iranian targets. As a result, Iran declared the Strait of Hormuz closed, prompting President Donald Trump to reinstate the blockade on the waterway.
This resurgence of tensions has impacted financial markets, undermining recent improvements for Americans. Inflation in the U.S. decreased last month, with a 3.5 percent increase in prices for the year to June, according to the Bureau of Labor Statistics, down from 4.2 percent previously. Lower oil and gas prices contributed to this larger-than-expected decrease. Yet, like mortgage rates, these prices are rising again, adding to inflationary pressures.
June CPI data showed headline inflation cooling to 3.5 percent and core inflation easing to 2.6 percent, both below expectations and a positive development for rate-watchers,” Jones commented. “However, renewed conflict in the Middle East has driven up oil prices and Treasury yields. Since mortgage rates align with the 10-year Treasury yield, they are likely to rise as long as oil markets remain unstable.
Future Expectations
Despite recent revisions in forecasts, many experts retain cautious optimism about mortgage rates in the coming months.
“Our midyear forecast still calls for a modest easing of mortgage rates over the second half of the year,” Jones mentioned. “This week’s inflation data supports that view for the long term, but the near-term trajectory remains dependent on developments in Iran.”
Speaking with Fox News, Trump expressed that he would target Iran’s infrastructure unless Tehran resumes peace discussions.
The immediate impact of higher mortgage rates will affect homebuyers facing rising prices, increased insurance premiums, and high property taxes. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume dropped by 2.7 percent compared to the previous week. Applications for home purchases fell 7 percent from the previous week and 2 percent from the same week last year.
The housing market has otherwise shifted in buyers’ favor this year, with prices cooling, inventory growing, and sellers offering more concessions. A lower CPI reading is encouraging, but until mortgage rates decrease accordingly, buyers will continue to struggle,” Jones said.
For homebuyers, the advice remains clear: prioritize finding a home within your budget and long-term goals over waiting for an ideal mortgage rate,” advised loanDepot Chief Investment Officer Jeff DerGurahian.
If inflation continues to rise, it poses challenges for the Trump administration and Republicans in the upcoming midterms. Trump’s approval ratings have remained in the 30s since April, declining amid the prolonged conflict with Iran.
Newsweek sought comment from the White House by email on Friday morning.
A Washington Post-Ipsos poll indicated only 37 percent of U.S. adults approve of Trump’s performance, with 33 percent endorsing his economic management and 29 percent supporting his handling of the Iran conflict.