What's driving a surge in mortgage rates amid the Iran war?
U.S. Treasury yields have surged amid war with Iran, threatening a spike in borrowing costs as a rise in gasoline prices already strains many household budgets.
High bond yields make borrowing more expensive for average Americans, since 10-year Treasury rates influence the rates offered for a variety of loans, including mortgages and credit cards.
The Middle East conflict is "hurting the opportunity for Americans to make ends meet, much less afford a potential home purchase," Mark Hamrick, senior economic analyst at Bankrate, told ABC News. "It's quite upsetting."
The yield on a 10-year Treasury bond, or the amount paid to a bondholder annually, stands at about 4.45%, marking a nearly half-percentage point jump from a month earlier.
On Friday, bond yields soared close to levels reached in the aftermath of President Donald Trump’s “Liberation Day” tariffs last April, when the 10-year Treasury yield peaked at around 4.5%.
When Trump eased those tariffs days later, Treasury yields came down and stock prices soared. Speaking at the White House at that time, Trump acknowledged the bond market had gotten the “yips,” though he denied bond yields had factored into his decision to reduce tariffs.
Since bonds pay a given investor a fixed amount each year, the specter of inflation risks higher consumer prices that would eat away at those annual payouts. In turn, bonds often become less attractive in response to economic turmoil. When demand falls, bond yields rise.
Jim Reid, a research strategist at Deutsche Bank, has described the upsurge in bond yields as “aggressive.” On Thursday, the 10-year Treasury yield closed at its highest level in eight months.
In a separate memo, Deutsche Bank Research warned bond yields could move even higher in the event of continued economic disruption tied to the U.S.-Israeli war with Iran.
The downside of rising bond yields is clear, experts say: borrowing costs go up.
Long-term Treasury yields help set interest payments for mortgages, credit cards, car loans and just about any other type of borrowing, Dominic Pappalardo, chief multi-asset strategist at Morningstar Investment Management, previously told ABC News.
The onset of this financial pain is exemplified by the housing market, where the average interest rate for a 30-year fixed mortgage jumped to 6.38%, Freddie Mac data on Thursday showed.
Mortgage rates climbed 0.16 percentage points from a week earlier, making it the largest one-week rise in mortgage rates since April 2025.
"Mortgage rates have risen as bond market yields have sought to price in the risk of higher inflation in the future," Hamrick said, citing concern about a war-related supply shock that may drive up consumer prices.
Each percentage point rise in a mortgage rate can impose thousands or tens of thousands of dollars in additional costs each year, depending on the price of the house, according to Rocket Mortgage.
The impact of bond yields on consumers isn't entirely negative, however.
The trend means better returns for investors who place their money into financial instruments such as money market funds or high-interest savings accounts, which are safer investments than the stock market.
