Mortgage rates rise to 6.37% while the war in Iran keeps oil prices high

Mortgage rates continued to rise this week as escalating tensions in the Middle East roiled financial markets, pushing borrowing costs higher.

The average rate on 30-year home loans rose to 6.37% for the week ending May 7, up 7 basis points from 6.30% the week before, according Freddie Mac. For perspective, interest rates averaged 6.76% in 2025 for the same period.

“The 30-year fixed rate mortgage averaged 6.37% this week,” says Sam Khaterthe chief economist of Freddie Mac. “Recent data points to slightly better conditions for buyers with an increase in new home sales, with average new home prices at their lowest levels since July 2021, and higher inventory than in recent years. Together, these trends could modestly ease affordability pressures during the spring home buying season.”

U.S. forces clashed with Iran this week in the blockaded Strait of Hormuz, sending gas prices soaring, rekindling inflation fears and pushing up Treasury yields, which closely track mortgage rates, as prospects for peace remained uncertain.

“After a brief period of optimism that interest rates might finally settle, this new escalation was a reminder that the path to lower interest rates currently runs straight through the Persian Gulf,” said Realtor.com® senior economic research analyst Hannah Jones.

The ongoing conflict, which has seen US troops clash with Iranian speedboats, has kept oil prices high, fueling inflation concerns and giving the Federal Reserve little incentive to cut interest rates in the near term.

At last week’s Federal Open Market Committee (FOMC) meeting, the majority of policymakers were led by the chairman Jerome Powell, voted to keep the federal funds rate at the current range of 3.5%-3.75%.

“The bottom line for borrowers is that the forces keeping rates high are global, and there is no clear catalyst for a meaningful, sustained decline in the near term,” Jones says. “Despite this less sunny outlook, mortgage interest rates remain at their lowest levels over the past few years, meaning buyers are still in a better position to afford a home this buying season than in recent years, especially as home prices continue to fall.”

For buyers still struggling with affordability, a growing number of families are finding a creative path forward by purchasing together. A new report from Realtor.com shows that nearly 4 million households have already embraced multigenerational living, and this trend is accelerating as families pool their incomes and share the costs to make homeownership work.

According to Jones, while multi-generational homes come at a premium, the financial logic is compelling, as a combined family income can stretch a budget significantly further than a single buyer could do alone, while offsetting costs like childcare and elder care that weigh heavily on family finances.

The analyst points out that the housing market is more navigable than headlines suggest, for buyers willing to think outside the box about their options. Whether that means lenders have to shop around to get a better interest rate, use time on the sidelines to work toward a stronger down payment, or explore multigenerational living to make the numbers add up, the path to homeownership remains open.

How mortgage interest is calculated

Mortgage interest rates are determined by a delicate calculation that takes into account the state of the economy and an individual’s financial health. They are most closely associated with the The yield on 10-year government bondswhich reflects broader market trends such as economic growth and inflation expectations. Lenders refer to this benchmark before adding their own margin to cover operating costs, risks and profits.

When the economy shows warning signs of rising inflation, government bond yields typically rise, causing mortgage rates to rise. Conversely, signs of falling inflation or weakness in the labor market typically cause government bond yields to fall, causing mortgage rates to fall.

However, the mortgage rate offered to you by a lender goes beyond these benchmarks and takes into account some of your personal factors.

Your lender will closely monitor your financial health, including your credit score, loan amount, property type, down payment size, and loan term, to determine your risk. Those with a stronger financial profile are considered lower risk and typically receive lower interest rates, while higher-risk borrowers receive higher rates.

How your credit score affects your mortgage

Your credit score plays a role when applying for a mortgage. A credit score determines whether you qualify for a mortgage and what interest rate you receive. The higher the credit score, the lower the interest rate you qualify for.

The credit score you need depends on the type of loan. A score of 620 is a “fair” grade. However, people applying for a Federal Housing Administration loan may be able to get approved with a credit score of 500, which is considered a low score.

Homebuyers with a credit score of 740 or higher are generally considered to be in very good standing and can typically qualify for better rates, which can lower monthly payments.

Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders apply stricter criteria when assessing whether they approve a loan. Ultimately, they want to be sure that you can repay the loan.