Full Breakdown
Impact of the Iran War on Mortgage Rates in the U.S. and U.K.
3/14/2026, 10:14:20 PM
Rising Mortgage Rates Amid Geopolitical Tensions
The ongoing conflict in Iran has significantly impacted mortgage rates in both the United States and the United Kingdom, leading to increased borrowing costs and heightened inflation concerns. As of March 12, 2026, the average 30-year fixed-rate mortgage in the U.S. rose to 6.11%, marking the second consecutive week of increases, up from 6% the previous week. This rise is attributed to the war's effect on oil prices and subsequent inflation fears, which have caused volatility in the bond markets.
Key Economic Indicators
The yield on the 10-year Treasury note, a critical benchmark for mortgage pricing, climbed to 4.25%, up from below 4% prior to the conflict. This increase is largely driven by concerns over oil supply disruptions through the Strait of Hormuz, which have pushed Brent crude prices above $100 per barrel. The Mortgage Bankers Association reported a 3.2% increase in mortgage applications for the week ending March 6, driven by a 7.8% rise in purchase activity, despite the rising rates.
Market Reactions and Consumer Behavior
Experts note that while the uptick in rates may deter some potential homebuyers, the current rate environment remains favorable compared to last year, when the average rate was 6.65%. Sam Khater, chief economist at Freddie Mac, indicated that buyers are still responding positively, with existing-home sales increasing by 1.7% in February. However, the uncertainty surrounding the conflict and inflation may keep some buyers on the sidelines.
In the U.K., mortgage rates have also surged, with the average two-year fixed residential mortgage rate rising to 5.01%. Lenders have withdrawn hundreds of mortgage products in response to changing interest rate expectations, with 472 products removed from the market recently. This volatility is reminiscent of the turbulent period following the U.K.'s mini-budget in September 2022.
Criticism and Opposition
Critics argue that rising mortgage rates exacerbate the housing affordability crisis, particularly for middle- and low-income buyers. With many homeowners having refinanced at lower rates during previous years, the current environment may further entrench wealth disparities in the housing market. Lawrence Yun, chief economist for the National Association of Realtors, noted that actual housing demand remains muted relative to wage growth and job gains.
Official Statements & Responses
The Federal Reserve is expected to maintain current interest rates in light of inflation dynamics and geopolitical tensions. Nigel Green, CEO of deVere Group, stated that the likelihood of rate cuts has diminished, with the next potential reduction not anticipated until July. Meanwhile, in the U.K., the Bank of England is predicted to hold rates steady at 3.75% during its upcoming meeting, with rising energy prices complicating the outlook for future rate cuts.
What's Next?
As the conflict in Iran continues, the trajectory of mortgage rates will depend heavily on developments in the energy sector and inflationary pressures. Analysts warn that if oil prices remain elevated, the Federal Reserve and the Bank of England may adopt a more cautious approach, potentially leading to sustained high borrowing costs for consumers.
Verbatim Quotes
- “Despite ongoing geopolitical tensions and broader economic uncertainty, overall demand remains strong.” — Bob Broeksmit, President and CEO, Mortgage Bankers Association
- “The Iran conflict — that's a major headwind” — Stephen Rinaldi, President, Rinaldi Group
- “This definitely feels like we’re back where we were a year ago: tariff uncertainty, economic uncertainty, geopolitical uncertainty.” — Hannah Jones, Senior Economic Research Analyst, Realtor.com
