The average rate on a 30-year fixed mortgage climbed to its highest level since August, threatening to derail the spring selling season as higher Treasury yields and renewed inflation pressure push loan costs higher and freeze more prospective buyers out of the market.

Freddie Mac data released Thursday show the 30-year fixed mortgage rate for the week ending May 21 jumped to 6.51% from 6.36%, the highest rate since Aug. 28, 2025.

Soaring mortgage rates stem from turmoil in the Gulf region, with the U.S.-Iran war driving up oil prices, inflation, and bond yields over the last three months. Rates on 10-year Treasuries hit their highest level in one year, while 30-year yields neared 2007 highs.

Mortgage rates fell to around 6% in early February, lifting hopes for a housing market rebound after three consecutive years of depressed activity. Yet hopes for a robust selling season were dashed because the conflict in the Middle East began in late February, and once the Hormuz chokepoint closed, energy prices surged, followed by rates.

"Each uptick in rates narrows the pool of buyers who can make the numbers work," Realtor.com analyst Anthony Smith told News Corp.

The impact of higher rates is significant for buyers: Before the conflict, a buyer with a $2,500 monthly budget and 20% down could afford about a $400,000 home at a 6% mortgage rate, but only about $384,000 at a 6.5% rate.

Realtor.com analyst Jake Krimmel told Bloomberg, "We've been surprised so far that we haven't seen deterioration like we did this time last year."

"May is where the rubber will meet the road because that's when things tend to really start picking up," Krimmel said.

The end result of surging rates over the last few months wasflat existing-home sales in April, well below Bloomberg Consensus expectations.

The continued housing market slowdown, which feels like an eternity for those in the industry, has pressured businesses tied to housing, such as furniture manufacturers, home builders, mortgage lenders, and real estate brokerages.

Source: ZeroHedge News