In short: Renewed geopolitical tensions have reintroduced inflation risks, pushing mortgage rates to their highest level in nearly a year, and threatening to turn recent housing market affordability tailwinds into headwinds.

Mortgage rates rose on renewed oil risks

Renewed geopolitical tensions in the Middle East have reintroduced upside risk to inflation, pushing the 10-year Treasury yield close to its May peak for the year. Longer term inflation expectations remain relatively contained, but an elevated term premium suggests investors are demanding more compensation for uncertainty. The 30-year mortgage rate has consequently returned to levels last seen 11 months ago. Zillow expects rates to ease only gradually, drifting to roughly 6.4% by the end of 2026

What’s the impact on housing?

Mortgage rates are still lower than a year ago, but that tailwind for housing activity may soon turn into a headwind. If rates end 2026 near 6.4%, that would be slightly higher than the range buyers saw in the fall and winter of 2025, making it tougher to compare listings and sales to last year.

Beyond raising inflation risk and borrowing costs, higher gas prices have the unintended effect of eating away at household budgets, making it harder to save for a down payment and dampening willingness to take on long-term financial commitments like buying a home. Where a household sits on the wealth ladder shapes how sharply those forces are felt — for luxury buyers, gas is a smaller line item, and a growing stock portfolio likely offsets the pain from rising household expenses. In June, luxury homes were in high demand, while starter home inventory accumulated, despite starter-home buyers having more options, less competition, and more negotiating power.