Mortgage Rates Rise Further as Iran War Sends Oil Back Above $100

Mortgage rates continued their ascent this week, climbing to a new 11-month high as the escalating conflict with Iran puts upward pressure on oil prices.

The average rate on 30-year fixed home loans reached 6.58% for the week ending July 23, up 3 basis points from 6.55% the previous week and the highest since early August 2025, according to Freddie Mac. For perspective, rates averaged 6.74% during the same period in 2025.

"The 30-year fixed-rate mortgage averaged 6.58% this week," says Sam Khater, Freddie Mac's chief economist. "As market conditions continue to evolve, borrowers should remember that shopping around for a mortgage rate can make a meaningful difference, potentially saving them thousands over the loan’s lifetime."

Although last week’s cooler-than-anticipated inflation report showed headline inflation retreating to 3.5% in June, the intensifying U.S.-Iran war is threatening to erase those gains as the price of oil topped $100 a barrel on Thursday.

Brent crude, the top global benchmark, crossed into the triple digits after the Houthis, Yemen's militant group backed by Iran, claimed to have attacked two oil tankers in the Red Sea. Rising oil price are sparking renewed inflation fears and leading investors to reassess the odds of a Federal Reserve rate hike.

According to Realtor.com® economist Jiayi Xu, these developments could once again add upward pressure on inflation, making a rate cut at next week's meeting of the Federal Open Market Committee nearly impossible.

"Driven by the rising energy prices, we may see a higher headline inflation reading in the coming month," warns Xu.

However, she points out that the key metric to watch is core CPI, which excludes volatile food and energy prices. If core CPI does not follow the headline number higher, that could offer some relief and potentially keep the Federal Reserve from implementing a rate hike.

Financial markets now put the probability of the central bank's policymakers increasing the federal funds rate from its current 3.50%-3.75% range to 3.75%-4.00% at 37.9%, according to CME FedWatch.

For the housing market, the ongoing geopolitical and economic volatility raises the question: Can the momentum of the most buyer-friendly spring market in recent years carry into summer?

Xu points out that while the uncertainty bred by the conflict is not helping matters, recent Realtor.com data indicates that so far it has not meaningfully affected real estate transactions.

Pending home sales have risen for seven consecutive months, and delistings and contract cancellation rates remain below year-ago levels.

"Together, these figures point to a market where buyers and sellers are staying engaged and adjusting to get deals done—a marked contrast to last summer, when the market stalled out," notes the economist.

How mortgage rates are calculated

Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.

When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to increase. Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates to fall.

The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.

Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.

How your credit score affects your mortgage

Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you'll receive. The higher the credit score, the lower the interest rate you'll qualify for.

The credit score you need will vary depending on the type of loan. A score of 620 is a "fair" rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.

Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates, which can reduce monthly payments.

Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders have stricter criteria when evaluating whether to approve a loan. Ultimately, they want to make sure you're able to pay back the loan.