Mortgage Rate Volatility: Middle East Conflict and Economic Uncertainty

Mortgage rates are experiencing increased volatility as the conflict in the Middle East introduces new uncertainties into the global economic landscape. While rates had briefly dipped to near 6% earlier this month, recent developments have pushed them back up, impacting both potential homebuyers and those looking to refinance.

Recent Rate Increases and Market Reaction

As of March 5, 2026, the average 30-year fixed mortgage rate stands at 6%, according to Freddie Mac . This represents a modest increase from the previous week’s 5.98%, halting a downward trend that had offered some relief to prospective buyers. Mortgage News Daily (MND) reported a jump of 13 basis points to 6.12% on Monday, averaging 6.15% as of this writing . HousingWire’s Mortgage Rates Center shows conforming loans at 6.19% on Tuesday, down 6 basis points from the previous week.

Impact of the Middle East Conflict

The primary driver of this rate increase is the escalating conflict in the Middle East. Concerns about potential disruptions to oil and gas supplies, and the resulting inflationary pressures, are causing investors to reassess their expectations for future interest rate cuts. Swap rates, which lenders use to price fixed-rate mortgages, have risen in recent days, prompting some lenders to pause or reconsider previously planned rate reductions .

Halifax Stands Alone in Rate Cuts

Amidst the broader trend of paused or reconsidered rate reductions, Halifax is an exception, having lowered mortgage costs for first-time buyers this week . This move contrasts with the actions of most other lenders who are taking a more cautious approach.

Broader Economic Context

The Bank of England (BoE) recently held interest rates steady at 3.75%, but expectations for a March rate cut have diminished due to the geopolitical uncertainty. The average rate for a two-year fixed mortgage is 4.53%, down from 4.75% last week, while the average five-year fixed deal is 4.89%, down from 4.99% . These averages are based on a 75% loan-to-value (LTV) mortgage, requiring a down payment of at least 25%.

Looking Ahead

The trajectory of mortgage rates will likely remain sensitive to developments in the Middle East and their impact on global inflation. A prolonged conflict could lead to a sustained increase in oil prices and a broader bond sell-off, potentially disrupting the recent downward trend in rates. While the current reaction has been more muted than some anticipated, the bond market is beginning to price in the potential effects of the conflict .