Mortgage Rates Soar Amid War Fears and Inflation Concerns

The average interest rate on a 30-year fixed-rate mortgage has reached its highest level in over a year, driven by concerns about war and inflation. According to Freddie Mac, the average rate is now 6.66%, up from 6.72% at the end of last July. This increase is largely due to rising oil prices, which have pushed up shipping costs and led to higher interest rates.

Kara Ng, a senior economist at Zillow, notes that 'oil prices always swing mortgage rates.' She explains that every time consumers fill up their gas tanks, they get a real-time read on what it means to buy a home. The average price of regular gasoline is now $4.10 per gallon, $1.11 higher than before the war began.

The conflict in Iran has investors worried, and many believe that a decisive end to fighting would be needed to calm their fears. Even then, markets may remain skeptical due to past experiences. The Federal Reserve's signal that an interest rate hike could come as soon as September has also contributed to the rise in mortgage rates.

The housing market is already struggling, with sales barely moving over the last three years and the average existing home selling for over $440,000 in June. A higher mortgage rate will only make it more difficult for people to afford homes, further slowing down the market.