Rising energy costs and persistent inflation add pressure to housing affordability as borrowing costs climb from year-ago levels.
U.S. mortgage rates remained elevated this week, with the average 30-year fixed-rate mortgage holding at 7.40%, as inflationary pressures associated with the Iran war complicate the outlook for borrowing costs and prolong the housing market’s affordability crisis.
The average rate was unchanged from the previous week but stood well above the 6.27% recorded a year earlier, according to Freddie Mac’s Primary Mortgage Market Survey released October 15, 2026. The increase underscores the challenges facing prospective homebuyers as higher financing costs erode purchasing power and threaten to keep demand subdued.
The average rate on a 15-year fixed-rate mortgage declined to 6.71%, from 6.73% the previous week, Freddie Mac reported.
“The average 30-year fixed-rate mortgage remained unchanged this week,” said Sam Khater, Freddie Mac’s Chief Economist.
Mortgage rates have faced upward pressure in recent months as the Iran war has heightened concerns about energy supplies, oil prices and the inflation outlook. Higher energy costs can ripple through the economy, increasing transportation and production expenses and making it more difficult for inflation to return to the Federal Reserve’s target.
The connection between inflation and mortgage rates is largely driven by financial markets. Mortgage rates typically track longer-term Treasury yields and mortgage-backed securities rather than moving directly with the Federal Reserve’s benchmark interest rate. When investors expect inflation to remain elevated, they often demand higher yields on longer-term investments, putting upward pressure on mortgage borrowing costs.
War-related inflation has added another complication for policymakers and investors weighing the trajectory of interest rates, government borrowing and economic growth. Even if the Federal Reserve holds or reduces its benchmark rate, mortgage rates can remain high if bond yields and inflation expectations rise.
For homebuyers, the consequences are immediate. Higher mortgage rates increase monthly payments, reduce the amount households can afford to borrow and potentially delay purchasing decisions. The resulting affordability squeeze can also weigh on home sales and broader housing-market activity.
Although weekly rates have stabilized, the year-over-year increase highlights how expensive home financing remains. A sustained easing in energy prices and inflation could eventually help bring borrowing costs down, but persistent price pressures threaten to prolong the strain on buyers and the housing market.
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