Renewed fighting between the US and Iran has rekindled uncertainty among investors, but it hasn’t caused mortgage rates to rise much, data shows.
The 30-year fixed rate mortgage continues to fluctuate around the mid-range of 6%. Freddie Mac said it averaged 6.49% as of July 9, up from the previous week’s average of 6.43%. At the same time a year ago, the 30-year fixed-rate mortgage averaged 6.72%.
Experts say that even though the situation in the Middle East is worrying, potential home buyers should not let it deter them from purchasing a new home. Instead of focusing on weekly mortgage rate fluctuations, home buyers should focus on things like credit scores and non-traditional downpayment sources that can make a significant difference in affordability.
“The key thing is not to wait for the right rate,” said Jeff Dergurahian, chief investment officer and chief economist at non-bank retail mortgage lender LoanDepot. “For homebuyers, the message is simple: focus less on waiting for the right rate and more on finding a home that fits your budget and long-term plans.”
Why are mortgage rates less affected by Middle East tensions?
Economists said the 30-year mortgage rate is directly tied to the 10-year Treasury note yield. When the 10-year Treasury yield changes significantly one way or the other, mortgage rates usually follow suit.
So, what changes the 10-year Treasury yield? Generally, any scenario that affects people’s appetite for government securities.
For example, when inflation rises, people often dump Treasuries because higher inflation erodes their fixed returns. Since Treasury prices move in the opposite direction to yields, yields rise as Treasury prices fall as investors sell.
When fighting between the US and Iran resumed, oil prices initially rose on fears that the Strait of Hormuz could be closed again. “Interest rates have risen this week as the gradual breakdown of the ceasefire with Iran has raised fears of further inflation and geopolitical instability,” Joel Berner, a senior economist at Realtor.com, said in a blog post.
If oil had continued to rise, inflation fears could have intensified and yields would have continued to rise. However, oil prices have come down, providing some relief.
What else might hold buyers back?
High home prices are affecting buyers. The National Association of Realtors said July 9 that the median sales price of an existing home reached a new high of $440,600 in June. It was the 36th consecutive month of year-over-year price increases.
Analysts said Americans can work on improving credit scores to get the best rates and terms, but if inventory remains low, prices will remain high.
“Without continued increases in inventory, home prices could continue to rise,” said Lawrence Yun, NAR chief economist. “It is important to introduce more supply into the market to increase homeownership opportunities.”
Young Americans create new pathways to home ownership
Young Americans are often cited as missing out on homeownership because they can’t afford to buy one, but Gen Z accounted for 1 in 5 — the largest share on record — with the purchase rate locked in in the three months through June, according to data provider Intercontinental Exchange’s July Mortgage Monitor. A purchase rate lock is when a lender guarantees a specific interest rate and points for a set period of time while the loan application is being processed.
The oldest members of Gen Z are approaching 29 years old.
“Despite facing the toughest affordability environment in decades, young buyers are finding ways to become homeowners,” said Andy Walden, head of mortgage and housing market research at Intercontinental Exchange.
Many of them are also boosting down payments using funding beyond savings, Intercontinental Exchange said.
Intercontinental Exchange said, “While 71% of 2026 home buyers relied on personal savings for their down payment, alternative, non-savings sources now account for 29% of all purchase down payments – the highest share in seven years.” Of those who used alternative income sources, nearly 1 in 5 Gen Z buyers relied on either family gifts or loans to make the down payment.
How can Americans buy a home?
The first thing buyers should know is what their credit score is; Then they should prepare a plan to improve it, financial experts said.
Lenders use credit scores as a measure to decide whether to approve a loan and on what terms, including interest rate. A high credit score tells lenders that you are at lower risk of defaulting on your mortgage. One way people can improve their credit score is by paying rent on time. A FICO survey revealed that half of renters do not know that paying rent on time can help build a person’s credit score.
According to Equifax, most conventional mortgages require home buyers to have a minimum 620 credit score for approval, but some first-time homebuyers may qualify for special government-sponsored loans with more lenient approval requirements.
Gen Z makes up nearly a third of all first-time homebuyer loans and 27% of Federal Housing Administration purchase loans, Intercontinental Exchange said in its report, “reflecting both its growing presence in the market and its reliance on government-backed financing to address affordability challenges.”
Potential home buyers should do the same thing they do for all major purchases: shop around for the best lending terms and rates. Experts say many home buyers don’t realize multiple mortgage-related credit inquiries within a short period of time (usually 45 days) are treated as a single inquiry when calculating your credit score.
Experts said lenders also compete for business and may cut you a deal.
Medora Lee is the money, markets and personal finance reporter at USA TODAY.