Houses in Rancho Cucamonga, California, USA, on Saturday, May 9, 2026.
Kyle Grillot Bloomberg | fake images
Growing concerns about the path of the war with Iran are causing bond yields to rise and mortgage rates to follow suit.
The average 30-year fixed loan rate rose 7 basis points Tuesday to 6.75%, according to Mortgage News Daily. That is the highest level since July 31. Rates have now risen 33 basis points in just the last 10 days and are 46 basis points higher than their recent April low of 6.29%.
That April drop came after a sharp rise in rates at the start of the war, when the rate jumped from 5.99% at the beginning of March to 6.64% at the end of the month.
“Bonds are telling politicians to get serious about ending the war or face increasingly dire consequences,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
The move from 5.99% to the current 6.75% is a significant change in housing affordability math. For a buyer who makes a 20% down payment on a $420,000 home (roughly the national median home price), their monthly principal and interest payment has gone from $2,012 to $2,179, a difference of $167.
The country's homebuilders are a little less sensitive to rate moves, as they have been lowering mortgage rates to attract buyers. Rates remain lower than a year ago, when they rose more than 7%.
“Rates are a challenge,” John Lovallo, a UBS home construction analyst, said in an interview Tuesday on CNBC’s “Squawk on the Street.” “But we're still at levels where builders can operate effectively. As quickly as rates have risen, they could fall just as precipitously if this war comes to some sort of resolution and oil retreats.”
Lovallo said he sees this as a buying opportunity for builder stocks, noting that home builders are still seeing average order growth during the spring season.
“Demand for housing remains strong,” he added.
Pending home sales increased month over month in April compared to a year ago, according to a Tuesday report from the National Association of Realtors.
“Buyers are exiting with cautious optimism despite growing economic uncertainty and a slight increase in mortgage rates,” Lawrence Yun, chief economist at Realtors, said in a statement. “Demand will easily be even higher once mortgage rates retreat to the levels they were at earlier this year.”
