Mortgage rates jump after Iran strike rattles markets

Late last week, the U.S. housing market appeared to be on solid footing going into March, but a wrench was unexpectedly thrown into the works when the U.S. and Israel launched a military strike against Iran over the weekend.

Mortgage News Daily reported Monday that 30-year fixed rates jumped 13 basis points (bps) from Friday, averaging 6.12%. While that number was down 62 bps from the same time last year, it’s also reflective of the 10-year Treasury yield moving higher this week after military action. As of this writing, MND has the 30-year rate at 6.15%. MND data is based on best-execution pricing from lender rate sheets.

HousingWire’s Mortgage Rates Center — which analyzes locked loan rates across all borrower credit profiles — shows that rates for 30-year conforming loans stood at 6.19% on Tuesday, down 6 basis points from one week ago. Rates for 30-year loans through the Federal Housing Administration were down 3 bps to 5.95% and rates for 30-year jumbo loans dropped 2 bps to 6.01%.

Today, HousingWire Lead Analyst Logan Mohtashami wrote an article about how mortgage rates were moving as a result of the Iran conflict, noting that while the reaction had been more muted than expected so far, the bond market is starting to price in those effects.

Last week, before the U.S. bombed Iran on Saturday, industry leaders said conditions were strong going into the spring home-buying season.

Matt Vernon, head of consumer lending at Bank of America, said that the arrival of sub-6% rates for the first time in more than three years would give home shoppers additional confidence and improved affordability. Vernon reported that mortgage application demand and funding volumes at BofA are up more than 20% year over year.

“Inventory has been a consistent challenge for buyers, and while more borrowers now have mortgages above 6% than below 3%, lower rates could encourage some to consider a move, though we’d expect this to happen gradually,” Vernon said. “In many cases, life events drive decisions more than rates alone, but lower rates could be the nudge some buyers and current homeowners have been waiting for.”

More foreclosures add to supply

Marty Green, principal at mortgage law firm Polunsky Beitel Green, said in written commentary that he expects three market dynamics to be a “robust catalyst for a market rebound in 2026.”

Lower mortgage rates, more competitive listing prices and higher foreclosure volume have “injected fresh energy into the market, driving activity during the early spring buying season,” Green said.

“A rise in foreclosure activity — mostly resulting from the implementation of more limited loan modification policies for distressed borrowers — is bringing more properties to market,” he added. “While these circumstances are difficult for the affected homeowners, the resulting sales provide a necessary increase in affordable, entry-level housing. It also places this inventory in the hands of owners who may have greater means to maintain, and even improve, the property.”

Cautious optimism for sales

Sam Williamson, senior economist at First American, released an analysis of the spring homebuying market last week in which he said that more supply could help snap a three-year slump in home sales.

“The increase in sales activity late last year coincided with house-buying power moving back above the median list price nationally,” Williamson said. “Whether price growth stays contained this spring will depend in large part on how supply evolves relative to demand. If supply remains tight and house-buying power stays ahead of list prices, the spring home-buying season may break out of a three-year slump, even if just modestly.”

After Freddie Mac reported last week that mortgage rates had dropped below 6% for the first time since September 2022, Bright MLS chief economist Lisa Sturtevant looked to temper expectations for more home sales. She pointed to Mortgage Bankers Association data showing that while purchase loan applications were up 12% year over year, they actually declined 5% from the prior week, indicating that buyers and sellers haven’t sprung to life just yet.

“There are still reasons why I’m only cautiously optimistic about the spring housing market,” Sturtevant added. “While overall economic numbers appear solid, economic uncertainty is still weighing on the minds of many prospective homebuyers and sellers.

“In addition to rates moving lower, people also are waiting for signs of stability, both in terms of rates and the economic and political environment. Wildcards like new tariffs, private-sector layoffs, changes in Federal Reserve leadership and potential international conflict could cast a shadow over the sunny lower-rate environment.”

Further developments that are likely to impact mortgage rates are arriving soon. The U.S. Bureau of Labor Statistics will release February jobs data on Friday, and the next Fed meeting is about two weeks away. Interest rate traders are nearly unanimous that the federal funds rate is likely to stay at a range of 3.5% to 3.75% this month, according to the CME Group’s FedWatch tool.