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Mortgage rates rise on news of Iran conflict, but still near 3-year low

The average 30-year mortgage rate moved up to 6.15% this week from 6.10% the previous week, according to Bankrate's national survey of lenders. Despite the slight uptick, mortgage rates are still near their lowest levels since September 2022.

The increase illustrates this truism: Markets hate uncertainty. President Donald Trump’s military action in Iran raised oil prices, roiled markets and pushed up mortgage rates.

“Rates have moved higher in response to the conflict with Iran, as investors have grown concerned about the potential inflationary impacts of the attacks,” says Lisa Sturtevant, chief economist at Bright MLS, a large listing service in the mid-Atlantic region. “If the conflict is limited in duration and scope, higher energy prices, bond yields and mortgage rates could all be temporary, and mortgage rates could settle back down to around 6%. The spring homebuying season might get a late start, but sales would likely rebound. Alternatively, if this is a prolonged conflict, there could be major energy disruptions, leading to higher inflation and higher mortgage rates, which could create [a] structural shift in the housing market with fewer transactions.”

Despite the larger decline in mortgage rates in recent months, home sales remain weak. The National Association of Realtors (NAR) said January home sales dropped 8.4% from December and 4.4% from January 2025 to an annual rate of fewer than 4 million. To put that in perspective, annual sales stood at 6 million during the pandemic and 5 million before the pandemic.

And there’s not much sign that the final numbers for February sales will be stronger. The Mortgage Bankers Association’s Purchase Index released Feb. 25 was up just 12% from a year ago — even though the average 30-year mortgage rate is three-quarters of a point lower than it was last February.

The Federal Reserve meets again in mid-March. While the Fed influences the overall interest rate picture, the central bank doesn’t directly control mortgage rates, and it’s possible for mortgage rates to rise even after the Fed cuts its benchmark rate — that’s what happened in 2024. However, the Fed seems unlikely to cut at its next meeting.

Learn more: Weekly mortgage rate trend predictions

The rates you see advertised here might not match the rate you're offered. That’s because mortgage rates are influenced by personal factors, like your down payment and your debt. And different lenders may offer you different mortgage rates and fees based on their business needs. 

That’s why it’s important to shop with multiple lenders — it can save you over $1,000 a year, according to research from Freddie Mac.

Here’s how to compare mortgage rates:

• Ensure you’re comparing the same loan type. If one rate is significantly higher or lower than another, make sure it’s for the same type of product. A government-backed loan, like an FHA or VA loan, won’t have the same rate as a conventional mortgage.
• Consider APR and mortgage rate. Your interest rate is one cost of borrowing money, but your APR includes that as well as other fees associated with your loan, making it a more complete picture of the actual cost. Some lenders charge lower rates on mortgages, but higher fees.
• Get quotes from different types of lenders. You may find different costs from a local bank or credit union compared with a national bank or an online lender. 

How your mortgage rate affects your monthly payment

Your mortgage rate impacts how much you pay month to month — sometimes by a lot. For this example, we’re using the principal and interest payment on a $400,000 house, assuming 20% down and a 30-year fixed-rate mortgage.

As you can see, every increase of half a percentage point between 5% and 7% changes the monthly payment by around $100. On a yearly basis, that’s a difference of $1,200. For more expensive homes, this difference is even larger.

How your mortgage rate is determined

Your mortgage rate depends on a number of factors, including your individual credit profile and what’s happening in the broader economy. These include:

• Your lender: Lenders set rates based on many factors, including their own supply and demand.
• Your credit and finances: The better your credit score and the higher your income compared to your debt, the better the interest rate you’ll likely get.
• Your loan size and type: The size of your loan, your down payment and the type of loan all affect your mortgage rate. For example, making a bigger down payment typically earns you a lower mortgage rate, as it reduces the lender’s risk. 
• Economic factors: Broadly, mortgage rates are impacted by forces like the Federal Reserve, inflation and investor appetite.
• Mortgage points: Also known as discount points, these are upfront fees you can pay to reduce your interest rate. Decide whether they're worth it with our guide to mortgage points.

How to refinance your current mortgage

Before you start applying for a mortgage, here are some mortgage resources to prepare you for the process: