Home buyers who have been patiently waiting for mortgage rates to drop have had to deal with an unexpected complication this year: the Iran war. Armed conflict halfway around the world might not seem to have much to do with the cost of buying a home in America, but rising oil prices, swings in the bond market and geopolitical uncertainty all play a role in driving up real estate prices.
And with affordability already stretched, even a small change in rates can make a difference.
Why oil prices matter
Oil’s valuation affects more in terms of the prices you pay than many Americans may realize. When production or shipping routes in the Middle East are threatened, energy prices can spike. This can increase not just the cost of gas but also food and other products, due to increased transportation costs.
The ripple effect extends even further. Investors worried about inflation typically demand higher yields on Treasury bonds, which is how the federal government borrows money. Although mortgage rates aren’t specifically defined by bond yields, they tend to move in the same direction.
According to Freddie Mac, the average 30-year fixed mortgage rate was 7.24 percent on Oct. 29, well above the 6.17 percent recorded a year earlier.
In the bond market, yields often fall during times of international conflict, as investors gravitate toward safer assets like U.S. Treasurys. That does not seem to be the case thus far in 2026.
Patrick Boyle, a former hedge fund manager and visiting professor of finance at King’s College London, said in an interview that the type of crisis makes all the difference. “A shock that threatens growth and drags prices down lets safe-haven buying win. A shock that raises energy prices when inflation is already above target lets inflation fears win,” Boyle said.
What it means for your budget
Rising rates don’t affect existing homeowners with fixed-rate mortgages, as their rates are already set. Prospective home buyers, however, can face mortgage payments that increase by thousands of dollars per year as rates climb higher.
Imagine you take out a $400,000 mortgage with a 30-year repayment term. If you get a loan at a 6.5 percent interest rate, your monthly principal and interest payment would be about $2,528. But if you wait and rates rise by one percentage point, your monthly payment would jump to approximately $2,797.
Over the course of a 30-year mortgage, all other things being equal, you’d end up paying nearly $100,000 more than if you would have snagged the 6.5 percent loan.
Steven Parangi, manager at Alpine Mortgage Services, said in an interview the recent jump in rates is particularly painful because home prices have also soared. Even a half-percentage-point increase can put a home out of reach for some buyers.
He compared the uncertainty to the mortgage-rate spikes of 2021 and 2022, warning that even professionals struggle to predict where rates are headed.
And waiting can be costly. “I have seen buyers hold out looking for an eighth or quarter percent rate drop only to have rates move against them before they finally lock,” Parangi said.
What buyers can do now
Home buyers don’t have any control over wars, oil prices, geopolitical developments or interest rates. Even experts struggle with predicting the direction of mortgage rates, so it’s better to focus on the factors you can actually influence to help protect your finances while shopping for a mortgage.
- Compare lenders. Mortgage lending is an extremely competitive business. If you ask for a quote from three different lenders, you’re likely to get three different loan packages. The Consumer Financial Protection Bureau recommends comparing the total cost of a loan that you are specifically offered, including interest rates, annual percentage rates, fees and closing costs, not just a rate you see advertised online.
- Ask about a rate lock. If you’ve found a home and are preparing to close, locking your mortgage rate can protect you against last-minute increases. Ask how long the lock lasts, whether it costs extra and what happens if closing is delayed.
- Stress-test your budget. Calculate your monthly payment at a rate at least half a percentage point higher than today’s quote. If you don’t still have room in your budget for things like taxes, insurance, maintenance and unexpected repairs, you might have to adjust your expectations in terms of the home you can actually afford.
- Don’t count on refinancing. Rates could decline later, but basing your homebuying strategy on the hope that they will fall in the future amounts to a gamble. Only consider buying if you can afford ongoing payments at today’s rates. “The biggest mistake is buying a house you can only afford if you refinance later,” Boyle said.
The temptation may be to wait until the geopolitical situation settles down. But it’s hard to predict when that will happen. As Parangi advised, “Buy a home because the payment works today. Treat a future drop in rates as an opportunity and not as part of the financing plan.”
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