What Surging Mortgage Rates Mean For Summer Home Sale Season

Senior Housing Reporter

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Mortgage rates have soared to their highest level since last August, according to the latest data by Freddie Mac, with the average rate on 30-year fixed home loans jumping to 6.51 percent for the week ending May 21 from 6.36 percent the week earlier.

As of Monday morning, they had inched even higher: according to Bankrate, the national average 30-year fixed rate mortgage was 6.65 percent on May 25, up 0.07 percent from the previous week.

This recent rise in mortgage rates, which followed the start of the Iran war in late February, is a complete betrayal of what experts’ expectations for this year were—and of their hopes that affordability in the U.S. housing market would improve with lower borrowing costs.

“Coming into the year, we expected a stronger spring season than 2025. Mortgage rates were meaningfully lower year-over-year, wages had grown faster than home prices, and inventory was finally loosening up,” Redfin chief economist Daryl Fairweather told Newsweek.

“But then the war in Iran started, and it hit at the worst possible moment. Mortgage rates spiked, gas prices surged, and confidence cratered.”

As a result, they now say, the sluggish U.S. housing market will likely remain so this summer after an underwhelming spring season, in further bad news for home sellers struggling with dwindling demand and strong competition.

How High Are Mortgage Rates? A Historic Perspective

Mortgage rates have been on a bit of a rollercoaster since the pandemic. Between 2020 and 2022, rates reached as low as 2.6 percent, triggering a homebuying frenzy across the country.

But after inflation started rising in 2022, the Federal Reserve launched an aggressive rate-hiking campaign to lower its climb, which sent mortgage rates through the roof.

Between 2022 and 2023, mortgage rates averaged nearly double what their pandemic lows had been, reaching a peak of 7.8 percent in October 2023 for 30-year fixed rate mortgages. Since then, higher borrowing costs have played a crucial role in the ongoing housing affordability crisis in the U.S., even as they lowered back below the 7 percent mark over the past year or so.

This year, mortgage rates should have fallen to 6 percent and below, according to experts’ predictions. But the Iran war has shaken things up in a way that has brought mortgage rates back on the rise.

In the week ending May 21, mortgage rates hit a nine-month high, undermining the declines reported since last summer. Despite these recent hikes, borrowers are still facing lower rates now than last year, when rates averaged 6.86 percent during the same week.

Whether mortgage rates will continue rising or will finally start declining again in the coming months will depend mainly on the war in Iran, experts believe.

“It could really go either way,” Fairweather said. “The Iran war created a shock, but the question is how long it lasts. If the Strait of Hormuz situation stabilizes and oil prices come back down, inflation pressures ease, and the Fed gets back on its cutting path—rates could drift back toward the low 6s, maybe even 6 percent, by end of year,” she said.

“But we genuinely don’t know when or whether that happens. The longer we go without any good news out of the region, the more upward pressure rates will face.”

Americans could just as easily see rates climb back toward 7 percent instead, according to Fairweather.

What This Means For Homebuyers And Sellers

The U.S. housing market was expected to wake up from the winter slumber this year with a boost in sales during spring homebuying season, encouraged by lower mortgage rates and more inventory in the market.

But growing economic uncertainty around the impact of the conflict in the Middle East, ongoing affordability challenges and rising mortgage rates have hindered this resurgence. Instead, the country has seen only a modest improvement in demand.

“The season underperformed what it could have been, but I’d stop short of calling it a defeat,” Fairweather said. “The underlying conditions for buyers actually improved, the war just got in the way,” she added.

“New listings have hit their highest April level since 2022, contract signings in April were up 4.5 percent and are also at their highest year to date level in 4 years,” Jake Krimmel, senior economist at Realtor.com told Newsweek.

That’s all coming despite rising mortgage rates, spiking inflation and gas prices, and the lowest consumer sentiment on record,” he noted. “It does make me wonder where the housing market would be were it not for the Iran war and resulting fallout.”

In short, things could be better in the U.S. housing market—and probably would have been without the war in the Middle East. But the silver lining is that, after years of troubles, American homebuyers are getting used to less-than-ideal conditions and adjusting their expectations to the new normal.

“Looking at the big picture, we’re seeing a housing market that has essentially recalibrated to a ‘higher for longer’ rate environment. Buyers aren’t waiting for 3 percent again, they’re finding ways to make 6 percent work,” Krimmel said.

“That’s a noticeable shift from two years ago.”

In the short term, however, “there’s no doubt that the unexpected rise in interest rates over the past 3 months will hurt housing demand,” Krimmel said.

“Rates are still lower than they were at this time last year, but they’re up 53 basis points in the last 12 weeks. That has no doubt kept some potential buyers on the sidelines.”

Fairweather expects this summer to be characterized by “hesitation with pockets of activity” in the U.S. housing market.

“The families who have to move (for job relocations, life changes, growing households) will move. But discretionary buyers, the ones who were on the fence, are going to sit tight and wait to see how the war plays out and whether gas prices come back down,” she said.

“I’d expect more price cuts in markets that were already softening, especially in the South and parts of the West. And inventory will keep growing because sellers who listed this spring aren’t going to take their homes off the market,” she added.

“So it will feel like a buyer’s market in many places, but ‘buyer’s market’ doesn’t mean affordable. It just means you have more choices.”

While higher mortgage rates would likely discourage some sales, Krimmel is “still cautiously optimistic that things will look more normal than the past two summers” in the coming months.

“If demand signals, such as increased contract signings, hold it should translate into a meaningful uptick in closed sales in May and June—months that are typically the strongest seasonally, something the market has been waiting on for the better part of three years,” he said.

“The wildcard is whether geopolitical uncertainty in the Middle East stays contained or starts showing up in the data the way last year's tariff shock did,” he added. “Inflation is the real concern there because that will drive up mortgage rates while eating into consumers’ savings and paychecks at the same time, a horrible one-two punch for homebuyers.”

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