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Mortgage Rates Hit 7% Amid Iran Conflict and Rate Hike Fears
Confirmed
In Short: The Resolution Foundation had previously warned that sustained hostilities in the Middle East could deliver an £11 billion hit to UK family finances through higher mortgage rates, utility bills, and fuel costs.
The average 30-year fixed mortgage rate in the U.S. surged to 7.26% on Wednesday, according to Mortgage News Daily, amid heightened tensions between the U.S. and Iran.
Treasury yields also spiked, with the 10-year yield reaching its highest level since 2007, driven by fears of rising inflation and the potential for further interest rate hikes.
President Donald Trump's comments at the United Nations General Assembly, where he suggested Iran would reach a deal post-midterm elections, did little to ease market concerns. Working-level talks took place, but markets remained skeptical of a quick resolution.
The Federal Open Market Committee's upcoming meeting in late September has seen the odds of a rate hike rise to nearly 70%, reflecting growing concerns over inflation.
Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that firms' input costs have risen to their highest level in four years, with fuel and transport costs spiking due to higher oil prices.
Michael Barr, a Federal Reserve governor, warned that risks to achieving the inflation target have increased, while risks to the labor market have receded, suggesting a potential for further rate hikes.
Trump's proposal to ban U.S. diesel exports further exacerbated energy market volatility, with the American Petroleum Institute warning that such a move could lead to reduced refinery runs and higher U.S. prices.
The Resolution Foundation had previously warned that sustained hostilities in the Middle East could deliver an £11 billion hit to UK family finances through higher mortgage rates, utility bills, and fuel costs.
Global bond markets continued to slide, with borrowing costs reaching levels not seen in decades, driven by fears over inflation and ballooning government debt.
What's confirmed
- The average 30-year fixed mortgage rate in the U.S. surged to 7.26% on Wednesday, according to Mortgage News Daily, amid heightened tensions between the U.S. and Iran.
- Treasury yields also spiked, with the 10-year yield reaching its highest level since 2007, driven by fears of rising inflation and the potential for further interest rate hikes.
- President Donald Trump's comments at the United Nations General Assembly, where he suggested Iran would reach a deal post-midterm elections, did little to ease market concerns. Working-level talks took place, but markets remained skeptical of a quick resolution.
- The Federal Open Market Committee's upcoming meeting in late September has seen the odds of a rate hike rise to nearly 70%, reflecting growing concerns over inflation.
- Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that firms' input costs have risen to their highest level in four years, with fuel and transport costs spiking due to higher oil prices.
- Michael Barr, a Federal Reserve governor, warned that risks to achieving the inflation target have increased, while risks to the labor market have receded, suggesting a potential for further rate hikes.
- Trump's proposal to ban U.S. diesel exports further exacerbated energy market volatility, with the American Petroleum Institute warning that such a move could lead to reduced refinery runs and higher U.S. prices.
- The Resolution Foundation had previously warned that sustained hostilities in the Middle East could deliver an £11 billion hit to UK family finances through higher mortgage rates, utility bills, and fuel costs.
- Global bond markets continued to slide, with borrowing costs reaching levels not seen in decades, driven by fears over inflation and ballooning government debt.
What's still developing
- Bases; Washington Rejects Strait Reopening Offer Oil Climbs; Mortgage Rate Hits 7%, Rate-Hike Odds at 70% Trump Weighs Diesel Export Ban Ahead of Midterm Vote "More Tightening Needed" — U.N.
- The 10-year yield’s rise was its sharpest one-day jump since April 9, 2025, a week after Trump’s tariffs began roiling global markets, according to Dow Jones data.
- Six months into the US-Iran conflict, the UK property market has demonstrated greater resilience than initially forecast, according to recent market data and economic indicators.
- A buyer who could afford a £200,000 mortgage at the start of the year can now borrow around £182,000 for the same monthly repayment.
- Southern England and the prime market, especially for flats, face more challenging conditions.
- Michael Barr, a governor at the US central bank, said in a speech on Tuesday that inflation had been too high for five years and warned if it did not cool "then I think we should act decisively to raise rates".
- Warsh has remained tight-lipped about the potential path of interest rates, but investors have been monitoring comments in recent days and expectations of a rate hike this month have grown.
- After borrowing costs over 30 years hit levels not seen since 2007, Treasury Secretary Scott Bessent said the the US government would buy back more debt in a bid to lower rates, but the market's reaction to the announcement proved short lived.
- Latest figures show prices rose 3.4% in the year to July, above the Fed's 2% target, however, interest rates have been left unchanged for months between 3.5% and 3.75%.
- Bond investors typically demand higher returns - or yields - if inflation is high or they expect it to be elevated in the future, and such rates tend to set the path for borrowing costs in economies around the world.
- It is nearing the 5% level that could unsettle already jittery stock markets.
- Naka Matsuzawa, chief macro strategist at Nomura Securities in Tokyo, said so-called hyperscalers' willingness to pay reasonably high rates was pulling up yields broadly, with the focus now on whether growth can rise along with them to help economies cope with the higher rates.