MW Mortgage rates are moving higher at a crucial juncture for the housing market

By Joy Wiltermuth

Much of the new home supply has been built away from cities. Add in higher gas prices due to the Middle East conflict and things look even more challenging.

New residential housing under construction in September in Fontana, Calif. Mortgage rates jumped from a multiyear low of 6% in the wake of the Iran conflict, which also has pushed up gas prices.

President Donald Trump's Iran conflict has thrown a wrench in the roughly $13.6 trillion U.S. mortgage market, right ahead of the crucial spring home-buying season.

Rates on new 30-year fixed mortgages as of Monday have climbed to 6.36%, according to Mortgage Daily News. That's up from the multiyear 6% low briefly touched in January after Trump announced plans for Freddie Mac (FMCC) and Fannie Mae (FNMA) to purchase $200 billion in mortgage bonds.

Several factors influence mortgage rates, but the big issue lately has been tumult tied to the Iran conflict.

"That's the most important thing," said Brij Khurana, fixed-income portfolios manager at Wellington Management on Monday, noting that oil prices have surged, market volatility has increased and credit spreads have moved wider as the conflict enters a third week.

Like stock prices, credit spreads are a gauge of risk appetite that can move daily. In practice, they represent the extra compensation that bond investors are demanding above a risk-free rate, often the benchmark 10-year Treasury yield BX:TMUBMUSD10Y.

Spreads typically increase when investors feel jittery, worried about defaults or when alternative assets become more attractive to buy. Spreads in the roughly $9.5 trillion agency mortgage-bond market have been moving higher, with the "current coupon" near 5.25%, which is a spread of about 125 basis points above the risk-free Treasury rate. The spread was closer to 90 basis points in January.

Back then, the 30-year fixed-mortgage rate slipped below the psychologically important 6% level for the first time in years, spurring a flurry of new mortgage applications. Now, however, with global Brent oil prices (BRN00) above $100 a barrel and the U.S. benchmark (CL00) up 40% in March alone, households face higher gas prices at the pump, plus any pass-through from higher fuel costs on transported goods, such as groceries and other household items.

"As we enter the traditional spring home-buying season, confidence is critical," said Ed Brady, CEO of the Home Builders Institute, which focuses on education and skills training for the building industry.

"There's a lot of uncertainty with tariffs, the economy and job growth," Brady said. Now, there's also higher interest rates and gas prices.

Inflation concerns have dimmed odds of additional Federal Reserve rate cuts this year. While stocks SPX DJIA COMP rose Monday and the 10-year Treasury eased back, the benchmark rate still was at 4.219%, up 27 basis points from its 3.95% low in late October, according to Dow Jones Market Data.

"That shows you the uncertainty in the bond market, and that's going to play into interest rates until there's more clarity," Brady said.

Still, the problem remains one of too few homes being built to meet the deficit in U.S. home supply.

"The housing market is not in a good place," said Eugenio Alemán, chief economist at Raymond James.

A huge labor shortage has been hitting the construction industry at the same time that the immigrant-heavy building industry is competing with the AI data-center build-out, he said. "The cost of construction has gone through the roof because of a lack of workers, while tariffs are also making construction costs very high," he added.

Furthermore, much of the new home supply has been built away from cities, while many industries are recalling workers back to the office. Add in higher gas prices due to the Middle East conflict and things look challenging, Alemán said.

"The administration is certainly focused on affordability and housing," Brady at the Home Builders Institute said. "I think the whole world is hoping this is short term.

"The sooner this conflict is over, the better."

-Joy Wiltermuth

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March 17, 2026 08:00 ET (12:00 GMT)

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