The average 30-year fixed-rate mortgage hit 6.66% in July 2025, reaching its highest level in over a year according to data from the Federal Home Loan Mortgage Corp., commonly known as Freddie Mac.
Mortgage Rates Climb to One-Year High
The 6.66% average recorded by Freddie Mac marks the highest mortgage rates have reached since late July of the previous year, when the average sat at 6.72%, according to Freddie Mac data. The climb reverses a downward trend that began last summer and extended into early 2026. Mortgage rates had previously dropped below 6% in February, momentarily boosting buyer interest in a sluggish housing market where existing homeowners remained hesitant to surrender low pandemic-era rates.
“Oil prices always swing mortgage rates,” said Kara Ng, senior economist at Zillow, pointing to the immediate connection consumers experience at fuel pumps and the broader housing market. Following the onset of conflict involving Iran and the subsequent closure of the Strait of Hormuz, oil prices surged. Regular gasoline climbed to an average of $4.10 per gallon according to AAA, sitting approximately $1.11 higher than pre-conflict levels. These escalating shipping and energy expenses accelerated broader inflation, which subsequently pushed up the yield on the 10-year Treasury note—a benchmark that directly influences mortgage pricing.
Federal Reserve Signals and Home Affordability Pressures
Alongside energy costs, bond markets reacted to shifting signals from central bank policymakers. Following a Federal Reserve meeting where officials voted to hold the benchmark interest rate steady, three committee members voted in favor of a rate hike in September. According to market reporting, this rare split among rate-setters fueled investor expectations that borrowing costs could rise further in the near term.
Kate Wood, a housing expert at NerdWallet, noted that financial markets remain jittery due to ongoing volatility in the Middle East. “The best bet would be a decisive, conclusive, actually-sticks end to fighting in Iran,” Wood said, adding that investors might remain cautious even if hostilities permanently cease.
High borrowing costs compound existing affordability hurdles created by elevated home prices. Data from the National Association of Realtors shows that sales have remained largely stagnant over a three-year period. In June, the average existing home sold for more than $440,000, while overall sales volume declined by 2.4% compared to the previous year, leaving many prospective buyers sidelined.
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