--- title: "Iran War Impact Spreads: Mortgage Rates in Europe and the US Surge Sharply" type: "News" locale: "en" url: "https://longbridge.com/en/news/286830249.md" description: "The US 30-year mortgage rate has risen to 6.36%, the UK two-year fixed rate has jumped from 3.97% to 5.1%, and Germany's 10-year rate has climbed to around 3.6%. This upward trend is driven by forward-looking market pricing rather than central bank rate hikes. Economists warn that if the blockade of the Strait of Hormuz persists, stagflation risks will intensify, further cooling housing market activity" datetime: "2026-05-19T00:03:39.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/286830249.md) - [en](https://longbridge.com/en/news/286830249.md) - [zh-HK](https://longbridge.com/zh-HK/news/286830249.md) --- # Iran War Impact Spreads: Mortgage Rates in Europe and the US Surge Sharply The economic shock of the Middle East war is permeating the global real estate market. Mortgage lending rates in Europe and North America have surged sharply within just a few weeks, increasing pressure on homebuyers and borrowers seeking refinancing, while housing market transaction activity faces the risk of cooling down. This round of rate increases is not driven by central bank rate hikes, but stems from the Middle East conflict pushing up oil prices, thereby raising government borrowing costs. This has prompted mortgage lenders to bet in advance that official interest rates will eventually be raised to curb inflation. In the **United States**, the 30-year mortgage rate has risen to 6.36%, exceeding the level before the Federal Reserve launched its rate-cutting cycle in September 2025; in the **United Kingdom**, the average quoted rate for two-year fixed-rate mortgages jumped from 3.97% in late February to 5.1% in April, marking the most dramatic increase; in **Germany**, the 10-year mortgage rate also rose by approximately 0.3 percentage points to around 3.6%. Investors and economists warn that if the blockade of the Strait of Hormuz continues, mortgage rates will rise further, ultimately forcing central banks in various countries to hike interest rates, placing greater pressure on potential homebuyers. John Muellbauer, an economist at the University of Oxford, stated that an **escalation of the conflict "will push us into severe stagflation."** ## Central Banks Hold Steady as Markets Price In Expectations First The logical starting point for this rise in mortgage rates is not a shift in central bank policy, but rather forward-looking market pricing. The Middle East conflict erupted in late February this year, followed by a blockade of the Strait of Hormuz that caused oil prices to surge sharply. The Strait of Hormuz previously accounted for about one-fifth of global oil transportation. Rising oil prices have intensified inflation expectations, pushing up government bond yields in various countries, while mortgage lending rates are typically highly correlated with government borrowing costs. Mortgage lenders have incorporated these expectations into their pricing before central banks have taken action. **Analysts believe that once inflationary pressures persist, the Federal Reserve, the European Central Bank, and the Bank of England will be forced to restart rate hikes, at which point mortgage rates will face a new round of upward pressure.** ## United States: Dual Pressure from Supply and Demand In the United States, this round of rate increases occurs against the backdrop of an already fragile housing market. The 30-year mortgage rate has risen to 6.36%, surpassing the level before the Federal Reserve launched three rate cuts totaling 75 basis points last September. The easing effects brought by previous rate cuts have been almost completely offset. Matt Aks, an economist at Evercore ISI, pointed out that the US housing market suffered from overconstruction before the financial crisis, followed by a decade of underconstruction, resulting in a long-standing supply gap. Recently, this has been compounded by a high-interest-rate environment, placing significant pressure on the market. The Trump administration attempted to lower mortgage rates by having government-sponsored enterprises Fannie Mae and Freddie Mac purchase their own mortgage-backed securities, but the effect of this measure has been offset by the shock of the war. "Its impact was quickly drowned out by other factors," Aks said. Bradley Saunders, a North American economist at Capital Economics, believes that with mortgage rates remaining above 6%, the US housing market will struggle to gather any upward momentum. Brian Lewis, an agent at US real estate brokerage Compass, stated that **many potential buyers are accepting the reality that mortgage rates will not return to the 2% levels seen during the pandemic within their lifetimes.** ## UK Sees Sharpest Increase, Damaging Buyer Purchasing Power The UK is the market most significantly impacted by this round of mortgage rate increases. Data shows that the average quoted rate for two-year fixed-rate mortgages with a loan-to-value ratio of 75% has risen from 3.97% in late February to 5.1% in April, an increase of over 110 basis points in just a few weeks. Hina Bhudia, a partner at Knight Frank Finance, described this as **a "real hit to purchasing power" for homebuyers.** She warned that as the effects of rising mortgage rates gradually transmit through the economy, property transaction activity will inevitably slow down, and house prices will also come under pressure. "The ultimate impact largely depends on how long the conflict lasts." ## Germany: Rising Rates Increase Holding Costs In Germany, the largest economy in the Eurozone, the 10-year mortgage rate has risen by approximately 0.3 percentage points to around 3.6%. According to data from retail mortgage broker Dr Klein, this change means that for a new loan of €350,000, annual interest expenses will increase by about €1,000, reaching approximately €13,000. Florian Pfaffinger, an executive at Dr Klein, stated that interest rates **"rose sharply within just a few weeks,"** and market sentiment has become noticeably **"unsettled."** He also noted that some homebuyers are accelerating the completion of mortgage signings before rates rise further. ## Rising Stagflation Risks Put Pressure on Housing Market Market concerns about the outlook focus on two levels: whether the situation in the Strait of Hormuz can ease, and whether central banks will ultimately be forced to hike interest rates. Investors and economists generally believe that if the strait blockade continues, oil prices will remain high, and inflationary pressures will force central banks in various countries to tighten monetary policy, at which point mortgage rates will face a new round of increases. John Muellbauer, an economist at the University of Oxford, warned that the **"risk of miscalculation" between Trump and the Iranian leadership is rising,** and **if the conflict escalates, it "will push us into severe stagflation."** Bhudia from Knight Frank summarized that persistently high interest rates will ultimately lead to fewer homebuyers, with slowed transaction activity and pressure on house prices being inevitable outcomes. **The core variable in the current market has shifted from central bank policy to geopolitical developments.** ### Related Stocks - [EVR.US](https://longbridge.com/en/quote/EVR.US.md) - [FNMA.US](https://longbridge.com/en/quote/FNMA.US.md) - [FMCC.US](https://longbridge.com/en/quote/FMCC.US.md) - [COMP.US](https://longbridge.com/en/quote/COMP.US.md) ## Related News & Research - [US INTEREST RATES MOST LIKELY ON A PROLONGED HOLD-FT](https://longbridge.com/en/news/286857886.md) - [Warsh set to lead Fed with plan to shrink $6.7T balance sheet](https://longbridge.com/en/news/286405622.md) - [May 2026 savings choice: CDs lock rates, HYSAs offer access](https://longbridge.com/en/news/286628983.md) - [Bank of India hikes interest rates on select medium and long-term deposits](https://longbridge.com/en/news/286721327.md) - [Mortgage rates tick lower to 6.36%. 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