Iran war impact on mortgage rates: Buyers still $30K better off than 2025

What you'll learn ✅

• How the Iran conflict affected mortgage rates and what caused the shift from 5.98% to 6.22%
• Why you have $30,000 more buying power today compared to a year ago
• The real cost of waiting for lower rates versus buying now
• Whether to lock in your rate or float if you're already mid-process

Mortgage interest rates dropped below the 6% threshold on February 26, hitting  5.98%: a four-year low and a genuine psychological milestone for buyers. 

Then, U.S.-Israel strikes on Iran begin two days later. The price of oil spiked, bond yields climbed, and it wasn’t long before we saw mortgage rates rising. If you were about to pull the trigger on a home purchase, this probably felt like terrible timing. Why should I buy a home now?, you’re probably asking yourself. 

But here’s the thing that higher Iran war mortgage rates can’t erase: You likely have a lot more purchasing power today than you did a year ago.  

Let’s take a closer look at why, as well as other home buying affordability 2026 considerations, like the cost of waiting to purchase, where mortgage rates 2026 are headed, and more. 

...in as little as 3 minutes — no credit impact

What actually happened to rates — and why

The United States and Israel launched joint strikes against Iran on February 28. That, and other factors, triggered a chain reaction that ultimately affected mortgage rates and the housing market. Oil prices rose dramatically. That led to inflation fears, which caused investors to sell bonds. When that happened, Treasury yields increased, climbing from 3.96% on February 27 to 4.25% by mid-March.  

Since mortgage interest rates follow the 10-year Treasury yield, it’s little surprise that they’ve gone up accordingly. The benchmark 30-year fixed-rate mortgage loan, which was averaging a tantalizing 5.98% in late February, now averages 6.22% (at the time of this writing). 

“Rates hit 5.98% because the bond market was pricing in a cooling economy, and investors were buying treasuries to hedge economic risk, which pushed yields lower,” explains Erik Leland, a real estate broker with Realty First in Lake Oswego, Oregon. “When the Iran conflict started, oil prices surged and immediately reignited inflation fears in all sectors of the economy. When investors are worried about inflation, they sell bonds, which pushes treasury yields higher, and mortgage rates follow right behind.” 

While that rate climb is a notable jump, it’s not a catastrophic one. Truth is, even experts disagree on how much of the rate move is caused by the Iran war versus normal market repositioning. 

The $30,000 buying power stat — and what it actually means

One year ago, the 30-year fixed-rate mortgage loan averaged 6.67%. Today it's 6.22%, a drop that’s not insignificant. In fact, that gap translates to about $30,000 in additional buying power for a median-income household. Recent analysis shows that prospective buyers can now afford a $331,483 home, representing over a $30,302 boost in purchasing power since last year, marking the highest affordable price point for the market since March 2022. 

So yes, it’s actually easier to afford a home today than it was a year ago, thanks to relatively lower rates and a few other factors. Among those factors, national home prices grew just 1.3% in 2025 — the weakest appreciation observed since 2011. And half of the nation's 50 largest metro areas saw price declines over the past year. The combined effect of modestly lower rates plus cooling prices equates to a meaningfully better buying environment for home shoppers than 12 months ago — even after the Iran spike. 

Not only has purchasing power increased, but so have long-term interest savings. Imagine that a year ago, you could have purchased a $398,000 home (currently the median price for existing homes, per the National Association of Realtors¹ with a standard 20% down payment ($80,000). Back then, the average mortgage rate was 6.67%, which means your principal and interest payment would have been around $2,045 per month. But if you waited until today to buy that same home at the same price, at a 6.22% fixed rate, your monthly payments would be roughly $1,964, resulting in a savings of $91 every month. Over the full life of a 30-year loan, that lower rate would save you about $32,760 in total interest costs. 

Still in doubt? Learn what the average mortgage payment looks like for you, and if you're ready to get a custom quote, try Better's pre-approval. You can see your home buying budget and custom rates in as little as 3 minutes, without impacting your credit.

What waiting actually costs you

Fact is, this could be your ideal window of opportunity to take advantage of increased purchasing leverage and finance a home purchase.  

Yes, there’s always the chance that, if you wait things out, rates will drop lower as the year progresses, possibly drifting back toward 5.75% to 6% (as both Fannie Mae and the Mortgage Bankers Association forecast for later in 2026). If so, the savings you’d realize on a median-priced home would be measurable but modest. 

But especially if you are anticipating the purchase of your first home, postponing this decision could backfire. You’ll have to continue making rent payments, you’ll miss the spring buyer’s market and an influx of greater housing supply, and there’s always the risk that home prices stabilize or tick back up as more buyers return to the market. 

“Trying to time the perfect mortgage rate is a losing game because the variables that move rates – like geopolitics, Federal Reserve policy, inflation, and global capital flows – are genuinely unpredictable, and the cost of waiting is not zero,” says personal finance expert Ilona Limonta-Volkova. “Every month you spend on the sidelines is another month of rent paid to someone else’s equity, another month of not building wealth through ownership and equity building, and in many markets another month of prices drifting higher. The best time to purchase is when your income is stable, your credit is solid, your down payment is ready, and you have found a home you can hold for at least five years.” 

Leland agrees. 

“If you could have bought a $500,000 home a year ago but didn’t, missing that year may have cost you 3% to 5% appreciation, which translates to $15,000 to $25,000 in lost equity,” he says. 

The bottom line is that playing the waiting game and trying to time the perfect mortgage rate is a lesson in futility. The best time to buy is when you are financially ready. If that’s the case right now, consider that the current housing and financing environment, while imperfect, is substantially better than it was just a year ago. 

You’ve probably heard the catchphrase, “Date the rate, marry the house.” Yes, it’s a cliché, but it still resonates today. It extols the virtues of committing to a property you love, without delay, while accepting a higher interest rate temporarily until you can refinance. 

“Rates can always be refinanced later. Your house, its location, the neighborhood, the school district – you can’t change those after the fact,” notes Josh Katz, a personal finance professional. “The rate is a temporary condition. The right house is harder to replace.” 

...in as little as 3 minutes — no credit impact

What this means if you're already mid-process

Already under contract with a mortgage pre-approval, or pursuing a refinance? Don’t let recently rising rates spook you. If you're within 30 to 60 days of closing, consider locking in a rate now to eliminate uncertainty.  

Or, if you're in an earlier phase of the home-buying process, floating your rate can be a reasonable strategy, given forecasts of gradual moderation — but only if you can stomach some volatility. 

Another option is to explore locking a rate with a lender who offers a float-down option, the ability to lock into a lower rate should they drop.

When shopping around for mortgage rates, look to Better, which is built for exactly this kind of market. Better offers fast rate locks, transparent pricing, and no branch overhead that drives up your costs. 

What about refinancing?

Of course, if you are seeking to refinance your existing mortgage loan instead, the refi math is more sensitive to recent rate moves than a purchase loan would be. The key question is, what rate do you currently have? If you locked in above 6.5% or 7% between 2023 and 2024, for example, today's lower rates still represent a meaningful savings opportunity. 

But if you locked at 6% or below, refinancing now might not make much sense. Still, mortgage rate matters can change quickly, as we’ve seen when you compare rates a year ago to today.  

If you want to make a more informed decision about refinancing, use Better's refi calculator, the perfect tool to provide a personalized answer in minutes. 

Conclusion

Rates looked quite appealing just a few weeks ago. Then the Iran war happened, a geopolitical event that created a real but modest rate move. Yet it’s important to put this into proper perspective: This didn't reverse a year's worth of affordability gains. 

“The data right now show that purchasing power is up meaningfully compared to a year ago, inventory is rising in key markets, and price growth has moderated in many metropolitan areas,” adds Limonta-Volkova. “None of that makes the front page because it’s not alarming. But it is the real information that actually matters for someone deciding whether to buy this spring.” 

Remember – consumers who make actionable decisions based on data rather than headlines are better positioned than those who wait for a "perfect" rate that may never come. Head into a home financing and purchase with the confidence that you have the strength of favorable numbers behind you. 

Want to run the numbers? Use Better's refinance calculator or check our their rates pages to get a pulse on what makes sense for your situation.

...in as little as 3 minutes — no credit impact