Mortgage rates hit highest level in a year

U.S. mortgage rates climbed to their highest level in a year this week, adding new pressure to a housing market already strained by high home prices, weak sales and worries that inflation may prove harder to tame.

The average rate on a 30-year fixed mortgage reached 6.66% for the week ending July 30, according to Freddie Mac. That was the highest level since late July 2025, when the average rate was 6.72%.

The move comes after mortgage rates had been easing last summer and continued to decline into early 2026. Rates dipped below 6% in February, raising hopes that lower borrowing costs might draw more buyers into a sluggish market. Instead, rates have moved higher as investors react to renewed fighting involving Iran, higher oil prices and signals from the Federal Reserve that a rate increase could still be ahead.

Mortgage rates tend to follow the 10-year Treasury yield, which has risen as inflation concerns have grown. The Federal Reserve left its benchmark interest rate unchanged on Wednesday, but three members of its rate-setting committee voted for an increase. Markets saw the rare split as a sign that a hike could come in the near future, NPR reported.

CBS News reported that investors also appeared to question Federal Reserve Chairman Kevin Warsh’s commitment to raising interest rates to bring consumer prices under control. New government data released Thursday showed the Fed’s preferred inflation measure slowed in June, though inflation remained above the central bank’s 2% annual target.

“While it’s unclear if or when the central bankers might raise the funds rate, there’s plenty of concern that inflation’s running unchecked,” Kate Wood, a lending expert at NerdWallet, told CBS News in an email. “Between that and Iran, we’re seeing Treasury yields surge, and mortgage rates are being dragged up along with them.”

Deutsche Bank expects the Fed to raise rates twice this year by a total of 0.50 percentage points, which would bring the federal funds rate to between 4% and 4.25%, CBS News reported.

The conflict involving Iran has also pushed up oil prices, a key channel for broader inflation because fuel costs affect shipping and many other goods. NPR reported that the closure of the Strait of Hormuz raised oil prices, while CBS News said fighting in the Middle East could accelerate inflation if shipping disruptions push up oil and fuel prices.

“Oil prices always swing mortgage rates,” Kara Ng, senior economist at Zillow, told NPR. “You get a real-time read every time you go to a gas pump about what it means to buy a home.”

The average price for a gallon of regular gasoline was $4.10 on Thursday, according to AAA, about $1.11 higher than before the war began.

Realtor.com senior economist Anthony Smith said in an analysis that lower rates would depend heavily on easing the conflict. “Because oil remains the primary channel through which the Iran conflict feeds inflation, a de-escalation and a reopening of the Strait of Hormuz remain the clearest path back toward lower rates,” he said.

Wood told NPR that investors may need a clear end to the fighting before fears subside. “The best bet would be a decisive, conclusive, actually-sticks end to fighting in Iran,” she said. Even then, she added, “Markets might be a little bit once bitten, twice shy.”

CBS News reported that hopes for a peace deal have unraveled as Iran and the United States continue to exchange strikes. The conflict appeared to expand to Egypt on Wednesday after drone strikes caused two natural gas vessels to catch fire in Egypt’s Mediterranean port of Damietta.

Higher borrowing costs are compounding affordability challenges for buyers. Existing-home sales have barely moved over the last three years, according to the National Association of Realtors. In June, the average existing home sold for more than $440,000, while sales fell 2.4% from a year earlier.