A sharp increase in borrowing costs is threatening to halt the U.S. housing market’s fragile recovery, with geopolitical tensions half a world away directly impacting American homeowners.
Back
Back
US mortgage rates top 6.57% as Mideast sellers hit Treasurys
U.S. 30-year fixed mortgage rates surged to a seven-month high of 6.57% for the week ending March 27, as a selloff in U.S. Treasurys driven by the Middle East conflict pushed borrowing costs to their highest level since August 2025. The move extends a sharp reversal from early-year optimism that had provided a brief respite for the housing market.
"It’s more about a lot of uncertainty in risk markets and a demand for liquidity," said Thomas Simons, a money-market economist for Jefferies, noting that market participants are selling good assets "just to have cash."
The 14-basis-point weekly jump, reported by the Mortgage Bankers Association (MBA) on Wednesday, immediately suppressed housing activity. Applications for mortgage refinancing plunged 17.3% in a single week, while purchase applications fell for a second consecutive week. The rate spike follows a broader trend in March that has seen borrowing costs climb by nearly half a percentage point.
The spike in rates effectively erases the affordability gains from earlier in the year, posing a significant headwind to the crucial spring buying season. With borrowing costs rising, the housing market's nascent recovery is now in jeopardy, placing renewed pressure on homebuilders and real estate-related financial services.
Treasury Market Under Pressure
The primary driver behind the rate surge is the performance of the U.S. Treasury market, which is highly correlated with mortgage rates. Yields on 10-year and 30-year Treasurys jumped significantly through most of March on inflation fears stemming from the war in Iran.
This pressure has been intensified by foreign selling. According to BofA Securities strategists, custodial holdings of Treasurys—a proxy for demand from foreign central banks—have fallen by $66 billion since the start of March. Major oil-producing countries in the Middle East are reportedly among the sellers, reducing their holdings of U.S. government debt to increase their own liquidity amid the conflict.
A Fleeting Reprieve?
While the trend in March was sharply upward, markets saw a brief reversal to close the month. On Monday, March 30, the average 30-year fixed rate dipped back to 6.55%, according to Mortgage News Daily.
This dip corresponded with a rally in Treasurys, as investor concerns momentarily shifted from inflation to the risk of an economic slowdown. However, with the underlying geopolitical tensions and liquidity demands unresolved, it remains uncertain if the brief recovery in the bond market marks a definitive turning point for mortgage rates.
This article is for informational purposes only and does not constitute investment advice.
